INVESTMENT HIGHLIGHTS

• 1QFY18 earnings broadly within expectations

• Driven by property investment division

• 1QFY18 new sales at RM166m

• Maintain Neutral with a revised TP of RM1.60

1QFY18 earnings broadly within expectations. Sunway Berhad (SUNWAY) 1QFY18 core net income of RM121.9m came in broadly within expectations, making up 20% of our and consensus full year estimates. As expected, no dividend was announced for the quarter.

Driven by property investment division. SUNWAY 1QFY18 core net income grew 14%yoy to RM121.9m, mainly contributed by higher earnings from property investment division. Operating profit of property investment division climbed 21.1%yoy due to contribution from Sunway Pyramid Hotel and Sunway Velocity Mall. Meanwhile, operating profit of property development division was marginally lower by 1%yoy, mainly due to lower profit recognition from overseas projects. On the other hand, unbilled sales declined marginally to RM947m in 1QFY18 from RM976m in FY17, providing less than one-year earnings visibility to property development division.

1QFY18 new sales at RM166m. Sunway recorded new property sales of RM166m in 1QFY18, lower than new sales of RM617m in 4QFY17. New sales in 1QFY18 is deemed within expectation despite it only makes up 12.8% of our and management sales target of RM1.3b in FY18 as we expect sales to pick up in the coming quarters. Planned launch in FY18 includes projects in Klang Valley, Singapore and China with total GDV of RM2.0b.

Maintain Neutral with a revised TP of RM1.60. We maintain our earnings forecast for FY18/19. We revised our TP to RM1.60 from RM1.77 as we fine-tune our Sum-of-Parts valuation to reflect latest valuation of Sunway REITs and construction division (lower PER). We maintain our Neutral call on SUNWAY as we see neutral earnings outlook for property development division.

Source: MIDF Research - 22 May 2018