KEY INVESTMENT HIGHLIGHTS

• FY20 new sales exceeded expectations

• FY21 new sales target set at RM1.6b

• Stronger earnings outlook for 4QFY20

• Earnings forecast revised upwards

• Maintain NEUTRAL with a revised TP of RM1.42

FY20 new sales exceeded expectations. Sunway Berhad (SUNWAY) recorded total new sales of RM1.3b for FY20, exceeding management and our new sales target of RM1.1b for FY20. Recall that SUNWAY registered new property sales of RM270m in 3QFY20, bringing total new sales to RM943m in 9MFY20. The better-than-expected sales in FY20 were mainly due to sequentially higher new sales of ~RM360m in 4QFY20. Meanwhile, new sales of RM1.3b in FY20 were lower than new sales of RM1.55b achieved in FY19, mainly due to low property sales during MCO period.

FY21 new sales target set at RM1.6b. Looking ahead, management set higher new sales target of RM1.6b for FY21 on the back of planned launches with total GDV of RM2.8b. Key launches for FY21 include overseas projects namely Parc Central Residences (GDV: RM910m) in Singapore and Sunway Gardens Phase 3 (GDV: RM780m) in China. Meanwhile, local projects that will be launched in FY21 include Sunway Belfield Phase 1 (GDV: RM320m) in Jalan Belfield KL, Sunway ARTESSA (GDV: RM300m) in Wangsa Maju KL, Sunway Damansara Hill (GDV: RM220m) in Kota Damansara KL and Sunway Kajang Phase 1 (GDV: RM270m) in Kajang Selangor.

Stronger earnings outlook for 4QFY20. SUNWAY recorded weaker earnings of RM192m (-60.3%yoy) in 9MFY20 as most of its business divisions were hit by Covid-19 pandemic. Nevertheless, we expect earnings to be stronger in 4QFY20 due to anticipated stronger earnings from property development division. Earnings of property development division in 4QFY20 is expected to boost by bumper earnings recognition of Rivercove Residences project in Singapore and Sunway Gardens project in China as handover of the projects are expected in 4QFY20.

Maintain Neutral with a revised TP of RM1.42. We revise our FY20/21F earnings forecast by +1.3%/+4.2% to factor in higher sales in FY20. Our TP is revised to RM1.42 from RM1.34 as we narrow our RNAV discount for property development division to 25% from 36% in sum-ofparts valuation due to better sales outlook. Nevertheless, we maintain our Neutral call due to limited upside while outlook for its hospitality and leisure segment remains muted due to Covid-19 pandemic.

Source: MIDF Research - 7 Jan 2020