INVESTMENT HIGHLIGHTS

• Listing of healthcare division is a long-term catalyst

• Sales target of RM1.3b maintained

• Townhouse launch in Sunway Iskandar

• Maintain Neutral with an unchanged TP of RM1.60

We recently met up with Sunway Berhad (SUNWAY) management and came away feeling neutral on the prospect of Sunway Bhd. The key takeaways from the meeting are as below:

Listing of healthcare division is a long-term catalyst. SUNWAY is expanding its healthcare division by having four medical centres in the pipeline. Construction of Sunway Medical Centre 3 (245 beds) was completed in end of 2017, with Sunway Medical Centre Velocity (240 beds) is expected to complete in 1Q2019. Subsequently, construction of Sunway Medical Centre Seberang Jaya (180 beds) and Sunway Medical Centre Damansara (250 beds) is expected to complete in 2020 and 2022 respectively. Construction of Sunway Medical Centre Ipoh (200 beds) is expected to complete in 2023. Listing of healthcare division is expected to take place beyond year 2023, as we understand that medical centres typically take more than one year to turn profitable.

Sales target of RM1.3b maintained. Management is maintaining its sales target of RM1.3b for FY18 as it plans to launch project with total GDV of RM2b in FY18. SUNWAY launched Rivercove Residences (GDV: RM485m) in Singapore recently and has registered take up rate of 98%. Meanwhile, launches of Sunway GEO Lake (GDV: RM550m) is expected to take place soon. Likewise, Sunway Velocity TWO (GDV: RM320m) and Sunway Wangsa Maju (GDV: RM220m) are expected to be launched in 4Q.

Townhouse launch in Sunway Iskandar. SUNWAY is planning to launch Sunway Citrine Lakehomes (GDV: RM80m) which consists of townhouse and cluster homes in Sunway Iskandar. Note that Citrine Lakehomes is located next to the 20-acre Emerald Lake Garden and Citrine Commercial Hub. Management anticipates townhouse concept to be well received by homebuyers due to the lower selling price per unit of townhouses.

Maintain Neutral with an unchanged TP of RM1.60. We maintain our earnings forecast for FY18/19. Our TP of RM1.60 is unchanged, based on Sum-of-Parts valuation. We maintain our Neutral recommendation on SUNWAY due to its neutral earnings outlook in the near term. Nevertheless, the potential listing of healthcare division is a long-term catalyst.

Source: MIDF Research - 28 Jun 2018