SUNWAY’s 1HFY22 results met expectations. YTD sales of RM943m is also in line with our RM1.6b full-year assumption. Moving into 2H, we expect SUNWAY’s hospitality segment to continue improving and two of its newly built medical centres will commence operations. Maintain our forecasts, SoP-based TP of RM2.05 and OUTPERFORM call.

Within expectations. 1HFY22 CNP of RM228.1m came within expectations at 54% and 47% of our full-year forecast and the full-year consensus estimates respectively.

1HFY22 revenue rose 21% from the strong rebound in all of its operating segments against a pandemic stricken period a year ago. Consequently, CNP more than doubled.

Outlook. 1HFY22 sales of RM932m is deemed in-line our RM1.6b target (at 58%) but trails company’s internal target of RM2.2b (at 48%). We expect 2H sales to come in slightly weaker in anticipation of further rate hikes which would decrease affordability. Current unbilled sales remain healthy at RM4.14b (effective RM3.65b).

Moving forward, SUNWAY’s leisure and hospitality segment (as reflected within the property investment segment) still has room for improvement as it gradually reverts to pre-pandemic levels.

For healthcare segment, we are anticipating the strong profitability registered YTD 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 2H as there would be gestational losses.

Forecast. Keep FY22/23F earnings unchanged post results.

Maintain SoP-TP of RM2.05 despite rationalising our property developments valuations to 65%-discount to RNAV (in line with peers 60-65%) from PBV and updating TPs for SUNCON and SUNREIT. We continue to like Sunway for (i) its healthy pipeline of medical centres located within brownfield townships, (ii) quick turnaround model for its property development arm, and (iii) a diversified range of investment assets which provides stable earnings base. There is no adjustment to TP based on ESG for which it is given a 3-star ESG rating as appraised by us. Maintain OUTPERFORM.

Risks to our call include: (i) A prolonged downturn in the local property market; (ii) rising mortgage rates hurting affordability; (iii) rising construction cost; and (iv) changes in home ownership policies in local and overseas operations.

Source: Kenanga Research - 25 Aug 2022