Results

• 1QFY15 core PATAMI (after adjusting for EI of -RM13.4m) jumped by 20.7% yoy to RM133.1m (7.7 sen/share) which came in within expectations, making up 23.8% and 23.2% of ours and consensus’ full year forecasts, respectively.

Deviations

• None.

Dividends

• None.

Highlights

• Results… 1QFY15 revenue of RM1.1bn showed a growth of 3.3% yoy mainly due to improved performance from all business segments except property development segment. PATAMI margin during the quarter was 13.8%, an improvement of 3.7-ppts yoy from 10.1% in 1QFY14.

• Property… The segment showed a decline of 18.7%, mainly due to slower progress billings from local projects, as well as the completion of Sunway Nexis in Sunway Damansara in 4QFY14.

• As at 1QFY15, effective property sales was RM186m while its effective unbilled sales stood at RM1.8bn (1.5x of Sunway’s FY14 property development revenue). We expect property sales for FY15 to remain modest given tough market environment.

• Property Inve stment… Slightly higher revenue in 1QFY15 due to additional revenue from disposal of Sunway Hotel Georgetown and Wisma Sunway, which totalled RM22.9m. Excluding the sale, revenue and operating profit would arrive at RM116.4 and RM21.5m, showing a yoy decline of -9.4% and -51.9%, respectively).

• Con stru ction… Higher revenue of 4.6% yoy was attributable to local building projects and precast concrete division. Similarly, operating profit was higher mainly contributed by local building projects. As at 1QFY15, the group’s outstanding order book stands at RM2.8bn (1.6x of Sunway’s FY14 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

• Unchanged.

Rating

BUY

• We remain optimistic about the group, especially with the proposed listing of SunCon as it would further enhance sharehol ders’ val ue. As such, we are maintainingg our recommendation to BUY and advise investors to accumulate.

Valuation

• TP is unchanged at RM3.75 , based on SOP valuation. Maintain BUY.

Source: Hong Leong Investment Bank Research - 27 May 2015