INVESTMENT HIGHLIGHTS

• 1QFY19 earnings within expectations

• Earnings improved in 1QFY19

• Achieved new sales of RM263m in 1QFY19

• Earnings forecasts maintained

• Maintain Neutral with an unchanged TP of RM1.55

1QFY19 earnings within expectations. Sunway Berhad (SUNWAY) 1QFY19 core net income of RM136.4m came in within expectations, making up 22% of both our and consensus full year estimates.

Earnings improved in 1QFY19. SUNWAY 1QFY19 core net income is higher at RM136.4m (+13.8%yoy), driven by higher earnings from most of the core business divisions. Profit before tax (PBT) of property development division climbed 19.6%yoy due to reversal of provisions made previously. Similarly, PBT of property investment division inched up by a marginal 0.5%yoy due to higher contribution from Sunway Geo and theme parks. Meanwhile, PBT of healthcare division improved by 43.4%yoy, underpinned by higher occupancy from increased number of new beds and higher outpatient treatments.

Achieved new sales of RM263m in 1QFY19. SUNWAY recorded new property sales of RM263m in 1QFY19m, slightly lower than new sales of RM280m in 4QFY18. New sales in 1QFY19 is deemed within expectation as it makes up 20% of management new sales target of RM1.3b for FY19. Meanwhile, unbilled sales increased marginally to RM2.2b in 1QFY19 from RM2.1b in 4QFY18, providing 3 years earnings visibility to property development division.

Maintain Neutral with an unchanged TP of RM1.55. We make no changes to our earnings forecasts for FY19/20. We also maintain our TP for SUNWAY at RM1.55, based on Sum-of-Parts valuation. We maintain our Neutral call on SUNWAY due to limited upside.

Source: MIDF Research - 23 May 2019