9M16 CNP of RM376.3m which accounted for 78%/73% of our and streets’ full-year estimates was well within expectations. Property sales of RM864.0m are on track to meet our and management’s target of RM1.0b and RM1.1b, respectively. No dividend declared as expected. Maintain MARKET PERFORM with an unchanged Target Price of RM3.23.

Within expectations. 9M16 CNP of RM376.3m was within expectations, accounting for 78% and 73% of our and streets’ fullyear estimates, respectively. Property sales of RM864.0m are on track to meet our and management's respective target of RM1.0b and RM1.1b. However, we do note that our and management’s sales targets only saw a downward revision from RM1.4b previously in October due to the revision in planned launches. No dividends declared in 3Q16 as expected.

Results highlight. 9M16 revenue saw a decent improvement of 10%, YoY backed by steady growth from most divisions, which registered growth of between 6%-33%, except for the construction and quarry divisions which registered decline in revenue of 14% and 15%, respectively. However, CNP still registered a decline of 9%, driven by the spike in minority interest (+248%, YoY) as a result of a lower effective holding in SUNCON of 54.4% as a result of the listing exercise. QoQ, its 3Q16 CNP grew 10% albeit softer revenue, which saw a decline of 2%. The boost was mainly driven by improvement from its associate and jointly-controlled entities contributions, which registered growth of 36% due to better progressive billings from its Singaporean projects.

Maintain FY16-17 earnings. Post results, we make no changes to our FY16-17E earnings estimates of RM485.0-490.0m.

Outlook. We remain confident with SUNWAY’s ability in delivering a sturdy performance for the year premised on its strong unbilled sales of RM1.8b with 2-year visibility, a robust outstanding order book of RM4.8b that provides 2-3 year visibility and other divisions that has been generating decent growth over the years.

MARKET PERFORM. No changes to our MARKET PERFORM recommendation and SoP-driven Target Price of RM3.23, while maintaining our cautious view on the property market as we have yet to see much improvement in the market, especially bank loan approvals.

Downside risks to our call include: Weaker-than-expected property sales and construction order book replenishment, Higherthan-expected sales and administrative costs, negative real estate policies, and tighter lending environment.

Source: Kenanga Research - 28 Nov 2016