Results

9MFY13 core PATAMI (after EI adjustments of +RM28.6m) jumped by 38% to RM325.5m (23.3sen/share), beating estimates by making up 83% and 82% of ours and consensus estimates respectively.

Deviations

Due to stronger than expected performance in nearly all divisions.

Dividends

None. Dividends to be declared in 2Q and 4Q.

Highlights

9M results… Revenue grew by 20% to RM3.2bn, lifted by strong progress in nearly all divisions except Property Investments. Its huge backlog orders in the property and construction division drove revenue up by 43% and 29% to RM749.9m and RM1.2bn respectively, with property and construction EBIT up by 33% and 35% to RM131.9m and RM58.4m respectively. Contributions from Singapore projects (reported under JCE) also boosted overall earnings growth. The only weakness was the Property Investment and Trading/Manufacturing division which posted slight decline in earnings. Overall, core PATAMI grew by 38% to RM325.5m.

Quarter review… 3Q revenue climbed by 23% YoY but dipped by 5% QoQ to RM1.1bn. Meanwhile, core PATAMI grew by 32%/12% YoY/QoQ to RM124.4m. Earnings growth was driven mainly by the property division.

Property… Achieved effective new property sales of RM344m in 3Q (2Q: RM288m, 1Q: RM203m), hence bring YTD sales of RM835m, making up 76% of its RM1.1bn FY13 new sales target. 3Q sales were largely driven by South Quay launches. Singapore Novena (Effective GDV: RM555m) launched in October has achieved a take-up rate of 45%. Hence, Sunway is on track to exceed its new sales target again. Its unbilled property sales stood at RM1.8bn (see Figure #3), translating to 1.9x FY12’s property revenue.

Construction… Secured RM1.5bn worth of external construction orders, meeting our annual order book replenishment assumption for FY13. External outstanding order book stood at RM3.0bn (see Figure #4), translating to 2.4x FY12’s construction revenue.

Risks

Execution risk; Regulatory and political risk (both domestic and overseas); Rising raw material prices; and Unexpected downturn in the construction and property cycle.

Forecasts

Prefer to remain conservative by keeping our forecasts unchanged.

Rating

BUY

Despite the potential headwinds from property tightening measures and slower contract flows, its recapitalised balance sheet and large order book will be able to sustain earnings growth. Hence, we maintain our BUY call on Sunway.

Valuation

TP maintained at RM3.35 based on SOP valuation (see Figure #5)

Source:Hong Leong Investment Bank Research- 2 Dec 2013