9MFY21 CNP of RM92.3m came within consensus expectation, but above ours, as its property, construction and healthcare segments performed stronger than expected. No dividends declared as expected. 9MFY21 property sales of RM2.17b also beat our/management’s target of RM2.2b due to strong demand for Sunway Belfield and its Singapore projects. Increase FY21E/FY22E earnings by 42%/17% after imputing better margins and revenue recognition for property, construction and healthcare segments. Upgrade to OP (from MP) on higher SoP-TP of RM2.05 (from RM1.90).

Beat our expectation but within consensus’. 3QFY21 CNP of RM92.3m* brought 9MFY21 CNP to RM202m – above our expectation at 101% but within consensus at 69%. The positive deviation stems from stronger-than-expected contributions from its property development, construction and healthcare segments. Its property division saw the completion and handover of Sunway Geo Lake during the quarter which shored up property margins while construction segment saw upward revision to contract margins for projects near completion. Meanwhile, its healthcare segment’s revenue was stronger than expected on higher inpatient and outpatient activities while PBT margins remain healthy at double digit as losses at Sunway Medical Velocity continued to narrow. No dividends as expected.

3QFY21 gross sales of RM0.53b led 9MFY21 gross property sales of RM2.17b (effective RM2.08b) - above our/management’s FY21 gross target of RM2.2b each. Note, this is the second time sales have surpassed expectations during the year. The beat is mainly due to strong sales from Sunway Belfield (KL) and its three ongoing Singaporean projects which contributed RM0.46b during the quarter. Consequent to the outperformance, we raise FY21 sales target to RM2.7b. Note that the new sales target is backed by unchanged launch target of RM2.8b (effective RM2.3b). Current unbilled sales of RM3.8b (effective RM3.4b) provide c.4x revenue cover.

Highlights. 3QFY21 CNP of RM92m improved 78% QoQ mainly due to: (i) the absence of ICPS dividend payment worth RM25.7m, and (ii) stronger contributions from the property development, construction and healthcare segment as explained above. YoY, 9MFY21 CNP improved 76% on better contributions from healthcare segment, lower finance cost (-42%) and lower effective tax rate (-8ppt).

Revise FY21E/FY22E earnings higher by 42%/17% to RM285m/RM472m after factoring for better contributions from its development, construction and healthcare segments.

Upgrade to OP (from MP) with higher SoP-TP of RM2.05 after earnings upgrade for its healthcare division. Being severely affected by this pandemic especially its leisure and hospitality segments, we believe Sunway would be a good proxy for a recovery next year.

Source: Kenanga Research - 26 Nov 2021