INVESTMENT HIGHLIGHTS

• 9MFY16 earnings came in within expectations

• Cumulative earnings declined

• 9MFY16 property sales at RM864m

• Maintain Neutral with an unchanged TP of RM3.25

9MFY16 earnings came in within expectations. Sunway Berhad (SUNWAY) 9MFY16 core net income of RM385.6m was within expectation, making up 75% our and consensus full year estimates.

Cumulative earnings declined. On a sequential basis, 3QFY16 core net income of SUNWAY improved by 11%qoq mainly due to higher contribution from property development and property investment divisions, mitigating lower contribution from construction division. Property development division was mainly buoyed by increased contribution from Singapore project. On a yearly basis, 3QFY16 earnings were flattish yoy, bringing cumulative 9MFY16 earnings to RM385.6m (-7%yoy). The lower cumulative income was mainly owing to declining contribution from construction division, which offset higher earnings contribution from property development and property investment divisions. Note that EBIT from construction division declined 23%yoy following the listing of Sunway Construction Berhad and lower billings of its projects. Meanwhile, EBIT of property development division increased 32.5%yoy due to sales from Avant Parc project in Singapore and higher progress billings from local projects. Similarly, EBIT of property investment division climbed 3.9%yoy due to higher rental contribution from its investment properties. On a separate note, unbilled sales stood at RM1.8b as of June16, unchanged from the previous quarter, providing 1.5years earnings visibility to property development division.

9MFY16 sales at RM864m. SUNWAY registered new sales of RM251m in 3QFY16, bringing total new sales to RM864m in 9MFY16. The new sales in 9MFY16 accounts for 78.5% of management revised full year sales target of RM1.1b. Recall that management revised its property sales target to RM1.1b from RM1.4b for FY16 recently due to revision in SUNWAY property launches for FY16 to RM800m from initial launches target of RM1.6b. For FY17, management plans to launch property with total GDV of RM2b, located in several regions namely South Quay, Kelana Jaya, Penang, Johor, and China.

Maintain Neutral with an unchanged TP of RM3.25. We maintain our earnings forecast for FY16/17. We also maintain our TP for Sunway at RM3.25, based on Sum-of-Parts valuation. We are keeping our neutral view on SUNWAY due to overall challenging property market outlook

Source: MIDF Research - 28 Nov 2016