Turning the corner in 4Q21; Expect a promising 2022. Post MCO, we expect SUNWAY to register a strong 4Q21 results, underpinned by (i) the resilient healthcare division, (ii) record high property sales of RM2.6bn (+92% YoY), (iii) stronger contribution from the theme park operation, in which has re-opened on 7 Oct 2021 to fully vaccinated individuals, (iv) higher contribution from hospitality segment from the lifted of inter-state travel restriction as well as higher malls’ footfall (and higher sales turnover) from the shopping spree for Christmas celebration, and (v) normalisation of construction activities. With its wide ranging business exposure, the group is an excellent proxy to the economic recovery.

Sunway remains our top pick given its well-integrated property, construction and building material operations. Its efforts to expedite expansion of healthcare with its new strategic partner GIC, will culminate in the separate listing of healthcare unit to help unlock value in the group. The group is also taking the opportunity to strengthen company culture and quality by instilling the ESG element across its developments and various businesses.

The medical segment is a beast. SUNWAY’s medical segment has been a jewel in the crown during the pandemic, acting as a stabilizer during the lock-down period while providing enormous growth potential in the next five years on the back of aggressive expansion plan (c.2k beds by 2024). To recap, SUNWAY divested 16% stakes in Sunway Healthcare Holding Sdn Bhd in 1HFY22 to Singapore’s sovereign wealth fund, GIC Pte Ltd, for RM750m. The proceeds from the deal will serve as capital (covering ~40% of the CAPEX needed) for SUNWAY to accelerate its aggressive expansion plan (c.2k beds by 2024) with reduce reliance on debt. Note that SUNWAY’s medical segment is slated to be listed in the next 5-7 years to unlock its massive value for its healthcare business.

Pending a new upleg. As SUNWAY is currently trading at its support line, we suggest traders to adopt a range-bound trading strategy – buy at trendline support of RM 1.66 and sell during trendline resistance of RM 1.80. If SUNWAY staged a successful breakout above RM 1.80 will indicate a new uptrend leg had happened and lift the prices toward RM 1.92 -2.00 territories. Cut lost at RM 1.58.

Source: Hong Leong Investment Bank Research - 24 Feb 2022