1QFY22 CNP of RM118m is within market expectations. Sales of RM447m is in line with our RM1.6b target at 25% but trails management’s RM2.2b target at 20%. Nonetheless, note that as of 1QFY22, SUNWAY has yet to launch any of their RM2.3b planned launches for the year. Current unbilled sales stood at RM4.18b. Keep FY22/23E earnings estimates. Consequently, maintain OP on an unchanged SoP-TP of RM2.05.

Within expectations. 1QFY22 CNP of RM118.2m came within ours/consensus at 28%/25% respectively. No dividends were declared as expected.

Sales also inline. 1QFY22 sales of RM447m was in-line with our RM1.6b target (at 25%) but trails management’s target of RM2.2b (at 20%). We are more conservative vs. management due to: (i) fresh cooling measures in Singapore imposed in Dec-2021, (ii) absence of HOC incentives in Malaysia, (iii) further hikes in interest rates which would erode affordability, and (v) tougher sales climate in China due to the recent debt crisis and lockdowns in which Sunway has RM276m planned launches in Tianjin this year. That said, as of March-22, Sunway has yet to launch any properties out of their FY22 planned launches of RM2.3b. Current unbilled sales of RM4.18b (effective RM3.71b) provide c.4x revenue cover.

Highlights. QoQ, 1QFY22 CNP of RM118m was down 6% mainly because (i) previous quarters construction and property PBT was much stronger arising from upward recalibration of margins for projects reaching completion, and (ii) reduced PBT from Healthcare segment (- 10%) arising from the reduction of stake due to 16% stake sale to GIC.

YoY, 1QFY22 CNP leapt 103% mainly because all business segments recorded stronger PBT from the economic reopening (with exception to its trading and manufacturing).

Observations. Sunway’s leisure and hospitality segment (as reflected in its property investment segment’s operating profit of RM14.8m in 1QFY22) still has room to improve in the subsequent quarters as the economy gradually resumes into normalcy. We note that pre-pandemic average OP (before JVA) for its property investment segment is at RM56.7m.

For healthcare, despite being in the first quarter where the number of patients are lower (seasonally) coupled with the fact that we are no longer in peak Covid season (whereby there were more Covid inpatients during that time), 1QFY22 PBT (at 100% stake level) actually continue to grow QoQ (+6%) and YoY (+137%) recording an all-time high. Nonetheless, we are anticipating this strong quarterly profitability to come off slightly upon the commencement of Sunway Medical Tower D (+200 beds in first phase) and Seberang Jaya (+150 to 200 beds) in the coming quarter as there would be gestational losses.

Keep FY22/23E earnings unchanged post results.

Maintain OP with an unchanged SoP-TP of RM2.05. With its leisure and hospitality segment badly affected during this pandemic, we believe Sunway would be a good proxy for a recovery this year in line with the opening of border.

Source: Kenanga Research - 27 May 2022