INVESTMENT HIGHLIGHTS

• 1HFY17 earnings within expectations

• Earnings driven by property investment division

• 1HFY17 new sales at RM376m

• Maintain Neutral with unchanged TP of RM4.26

1HFY17 earnings within expectations. Sunway Berhad (SUNWAY) 1HFY17 core net income of RM248.1m came in within expectations, at 45% of ours and consensus’ full year estimates. Dividend of 7sen per share was also announced.

Earnings driven by property investment division. SUNWAY 1HFY17 earnings climbed 5%yoy to RM248.1m, mainly driven by higher contribution from property investment which offset the lower contribution from property development division. Operating profit of property investment division climbed 42%yoy mainly due to rental contribution from Sunway Velocity Mall which was opened in December and also due to reopening of Sunway Pyramid Hotel following a refurbishment exercise in 2016. Meanwhile, operating profit of property development division declined 32%yoy due to lower sales and progress billings from local development projects. On the other hand, unbilled sales stood at RM1.2b as of June 2017 (decline from unbilled sales of RM1.4b in March 2017), providing 1year earnings visibility to property development division.

1HFY17 new sales at RM376m. SUNWAY recorded new sales of RM234m in 2QFY17, higher than new sales of RM142m in 1QFY17 but lower than new sales of RM350m in 2QFY16. That brought total new sales in 1HFY to RM376m, lower than new sales of RM613m in 1HFY16. The total new sales in 1HFY17 make up 34% of our and management sales target of RM1.1b. Nevertheless, we are keeping our sales target at RM1.1b as SUNWAY will be launching more property projects in South Quay, Kelana Jaya, Penang, Johor, and China for 2HFY17.

Maintain Neutral with unchanged TP of RM4.26. We maintain our earnings forecast for FY17/18. Our TP is unchanged at RM4.26, based on Sum-of-Parts valuation. We maintain our Neutral recommendation on SUNWAY due to its flattish new sales outlook.

Source: MIDF Research - 30 Aug 2017