Results

• Within Expectations: 2QFY15 core PATAMI (after adjusting for EI of -RM101.2m) increased by 9% yoy, bringing 1H core PATAMI to RM267m which came in within expectations, making up 48% and 47% of ours and consens us’ full year forecasts, respectively.

Dividends

• Declared interim dividend of 5 sen/share (versus our full year forecast of 11 sen/share).

Highlights

• Results… 2QFY15 core profit of RM137m showed a growth of 9% yoy mainly due to improved performance from all business segments except property development and trading or manufacturing divisions.

• Property… EBIT from property showed a decline of 8% QoQ, mainly due to slower progress billings and lower contribution from Sunway Velocity.

• As at 1HFY15, effective property sales was RM353m while its effective unbilled sales stood at RM1.7bn (1.4x of Sunway’s FY14 property development revenue). We expect property sales for FY15 to remain modest given tough market environment. Management still maintain its full year target of RM1.2bn effective sales and target to launch RM2.1bn worth of projects in 2H15.

• Con stru ction… EBIT surged YoY and QoQ mainly due to reversal of over-elimination of intragroup profit in previous quarter. As at 2QFY15, the group’s outstanding order book stands at RM2.7bn (1.5x of Sunway’s FY14 construction revenue).

• Special Dividend on the way… pon listing of SunCon on July 15, Sunway’s shareholders are expected to recei ve a special cash dividend of 25-28 sen/share (based on 90- 100% payout from the restricted offer proceed). The company is expected to announce the ex-date in early Sept. In addition to regular dividend of 11sen/share, this will offer potential dividend yield of 11-11.5%.

• No impact from strengthening US D… We understand there are circa RM1.85bn of US borrowing in the balance sheet but this has been fully hedged and reflected in the latest quarter result report.

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 given the special dividend is on the card. As such, we are maintaining our recommendation to BUY.

Valuation

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

Source: Hong Leong Investment Bank Research - 28 Aug 2015