KEY INVESTMENT HIGHLIGHTS

• 9MFY19 earnings within expectations

• Higher earnings in 9MFY19

• 9MFY19 new sales at RM1.1b

• New sales target maintained at RM1.3b

• Earnings estimates maintained

• Maintain NEUTRAL with a revised TP of RM1.72

9MFY19 earnings within expectations. Sunway Berhad (SUNWAY) 9MFY19 core net income of RM485m came in within expectations, meeting 77% and 78% of our and consensus full year estimates respectively.

Higher earnings in 9MFY19. 3QFY19 core net income is higher at RM183.4m (+26.2%yoy), bringing cumulative core net earnings to RM485m (+19%yoy) in 9MFY19. The higher earnings were mainly contributed by healthcare and property investment division. Operating profit of healthcare division grew 33.1%yoy due to higher occupancy rate and higher outpatient treatments. Similarly, operating profit of property investment division climbed by 12.8%yoy due to higher contribution from its hospitality properties. Meanwhile, operating profit of property development division fell by 10.7%yoy mainly due to lower progress billings from local development projects.

9MFY19 new sales at RM1.1b. SUNWAY recorded new property sales of RM365m in 3QFY19, lower than new property sales of RM472m achieved in the previous quarter. That brought cumulative new property sales to RM1.1b in 9MFY19. Meanwhile, management is maintaining its new sales target of RM1.3b for FY19. On the other hand, unbilled sales increased marginally to RM2.8b in 3QFY19 from RM2.7b in 2QFY19, providing 3 years earnings visibility to the property development division.

Maintain NEUTRAL with a revised TP of RM1.72. We make no changes to our earnings forecasts for FY19/20F. We revise our TP to RM1.72 from RM1.56 as we rollover our valuation to FY20. Our TP is based on sum-of-parts. We maintain our Neutral call on Sunway Berhad due to limited upside.

Source: MIDF Research - 22 Nov 2019