INVESTMENT HIGHLIGHTS

• FY18 earnings within expectations

• Higher earnings in FY18

• Achieved new sales at RM1.88b for FY18

• New sales target set at RM1.3b for FY19

• Earnings forecast revised higher

• Maintain Neutral with a revised TP of RM1.55

FY18 earnings within expectations. Sunway Berhad (SUNWAY) FY18 core net income of RM591.2m came in within expectations, making up 105% of our and consensus full year estimates. Dividend of 3.62sen per share was announced, bringing total dividend to 7.12sen in FY18. This translates into dividend yield of 4.4%.

Higher earnings in FY18. SUNWAY 4QFY18 core net income was higher at RM183.7m (+17.6%yoy), bringing cumulative earnings in FY18 to RM591.2m (+4.9%yoy). The higher FY18 earnings were due to higher contribution from property investment and construction division, which cushioned the lower contribution from property development division. Operating profit of property development division eased 39.3%yoy due to lower progress billing from local development projects. Meanwhile, unbilled sales unchanged at RM2.1b in 4QFY18, providing 3 years earnings visibility to property development division.

Achieved new sales at RM1.88b for FY18. SUNWAY recorded new property sales of RM280m in 4QFY18, lower than new sales of RM760m in 3QFY18. That brought total new sales to RM1.88b in FY18, which is ahead of management sales target of RM1.7b. The new sales achieved in FY18 were higher than new sales of RM1.2b achieved in FY17. Looking ahead, management set lower new sales target of RM1.3b for FY19 on the back of launches with total GDV of RM2b.

Maintain Neutral with a revised TP of RM1.55. We revise our earnings forecast for FY19 by +2% to factor in the higher new property sales in FY18. We also introduce our earnings forecast for FY20. Correspondingly, we revise our TP to RM1.55 from RM1.50 as we narrow discount to 20% from 28% for property division in our Sum-of-Parts valuation. We maintain our Neutral call on SUNWAY due to limited upside and lack of fresh catalyst.

Source: MIDF Research - 1 Mar 2019