Results

• Within Expectations: 3QFY15 core PATAMI (after adjusting for EI of -RM13.7m) increased by 8% QoQ, bringing 9M core PATAMI to RM415m which came in within expectations, making up 74% and 75% of ours and consens us’ full year forecasts, respectively.

Dividends

• None. Total dividend declared year to date amounted to 43 sen/share (including special dividend of 26 sen and dividend in specie of 12 sen).

Highlights

• Results inline… 3QFY15 core profit rose 8% QoQ to RM147m mainly due to improved performance from all business segments except property development and trading or manufacturing divisions.

• Property… EBIT from property decreased by 6% QoQ and 56% YoY mainly due to completion of Sunway Nexis, Sunway Alam Suria and lower contribution from Singapore projects.

• For 9MFY15, effective property sales was RM564m while its effecti ve unbilled sales stood at RM1.7bn (1.4x of Sunway’s FY14 property development revenue). Given the headwind in the property sector, Sunway has followed its peers in revising downward its full year effective sales target from RM1.2bn to RM750m and GDV launch from RM2bn to RM1.2bn.

• Major launches in FY15 included Mount Sophia in Singapore (GDV:RM600m), Emerald Residence in Sunway Iskandar (GDV:RM430m) and commercial phases in Velocity (GDV:RM130m). Given the weak sentiment, Sunway has delayed the launches of 3 high rise developments: i) Sunway Geo Residence, ii) Sunway Gendaria, and iii) Casa Kiara.

• Con stru ction… SunCon was successfully listed on July 15. As at 3QFY15, the outstanding order book stands at RM4.3bn, implying a healthy cover ratio of 2.4x on FY14 revenue. YTD job wins currently stands at RM2.6bn, surpassing management’s target of RM2.5bn. Given its strong track record, SunCon should be a main beneficiary of upcoming tenders for LRT, MRT and BRT.

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

Valuation

• TP is adjusted slightly from RM3.75 to RM3.63, based on SOP valuation post adjustment on special dividend and higher SOP from Sunway Construction (based on TP RM1.59). Maintain BUY.

Source: Hong Leong Investment Bank Research - 27 Nov 2015