INVESTMENT HIGHLIGHTS

• FY17 earnings within expectations

• Flattish earnings

• FY17 new sales at RM1.2b

• Maintain Neutral with a revised TP of RM1.77

FY17 earnings within expectations. Sunway Berhad (SUNWAY) FY17 core net income of RM566.3m came in within expectations, at 104% and 101% of our and consensus full year estimates respectively. Dividend of 3.0 sen was announced.

Flattish earnings. SUNWAY FY17 core net income of RM566.3 grew by a marginal 3%yoy, as higher contribution from property investment and construction divisions cushioned the lower contribution from property development division. Operating profit of property development division dropped 27.1%yoy due to lower earnings recognition from local development projects. Meanwhile, property investment division recorded better performance due to contribution from Sunway Velocity Mall (opened in December 2016) and Sunway Pyramid Hotel. On the other hand, unbilled sales stood at RM976m (declined slightly from unbilled sales of RM991m in September 2017), providing less than one-year earnings visibility to property development division.

FY17 new sales at RM1.2b. Sunway recorded new sales of RM617m in 4QFY17, higher than new sales of RM207m in 3QFY17. That brings total new sales in FY17 to RM1.2b, flattish against new sales of RM1.2b in FY16. The total new sales of RM1.2b are ahead of our target of RM880m as sales were stronger than expected in 4QFY17. Meanwhile, new sales in FY17 is slightly ahead of management sales target of RM1.1b. Looking ahead, management is targeting to achieve new sales of RM1.3b in FY18 on the back of launch target with GDV of RM2.0b (55% in Klang Valley, 24% in Singapore, 10% in China and 11% in other region)

Maintain Neutral with a revised TP of RM1.77. We are revising our FY18 earnings forecast upwards by 2.6% after inputting the latest new property sales. Correspondingly, our Sum of Parts-derived TP is revised to RM1.76 from RM1.77. We maintain our Neutral recommendation on SUNWAY due to its neutral earnings outlook for property development division.

Source: MIDF Research - 1 Mar 2018