KEY INVESTMENT HIGHLIGHTS

• 1HFY24 earnings within expectations
• Solid earnings in 1HFY24
• New sales on track
• Earnings forecast revised upwards
• Maintain NEUTRAL with a revised TP of RM4.15

1HFY24 earnings within expectations. Sunway Berhad's 1HFY24 core net income of RM387.1m came in within expectations, making up 51% and 49% of our consensus full year estimates respectively. Sunway Berhad announced first interim dividend of 2sen per share.

Solid earnings in 1HFY24. Sequentially, 2QFY24 core net income was higher at RM218.3m (+29.5%qoq) due to earnings recognition from ongoing local projects and projects in Singapore. On yearly basis, 2QFY24 core net income was higher (+30.3%yoy), bringing cumulative earnings in 1HFY24 higher at RM387.1m (+22.7%yoy). The higher earnings were underpinned by improved performance of most of its core business divisions. Profit before tax (PBT) of property development division was higher (+51%yoy) due to higher progress billing of local project and earnings recognition of Singapore project. Similarly, PBT of property investment division was higher as retail and leisure industry continue to recover. Meanwhile, healthcare division remains solid due to resilient performance of its three operating hospitals.

New sales on track. Sunway Berhad recorded new property sales of RM802m in 2QFY24, higher than new sales of RM498m in 1QFY24. That brought total new sales to RM1.3b, well on track to achieve new sales target of RM2.6b for FY24. Looking ahead, new sales momentum in 2HFY24 is expected to sustain by planned launch with total GDV of RM1.2b in 2HFY24. Key launches in 2HFY24 include Kelana Jaya Phase 2 (GDV: RM455m) and Sunway Flora Plot 2 Tower A (GDV: RM232m).

Meanwhile, property unbilled sales increased to RM4.5b in 2QFY24 from RM4.2b in 1QFY24.

Maintain NEUTRAL with a revised TP of RM4.15. We revise our earnings forecast for FY24F/25F/26F by +7.2%/+4.3%/+1.2% as we factor in earnings contribution from Singapore project which will be completed in 2HFY24. Our TP for Sunway Berhad is revised to RM4.15 from RM3.98 as we update valuation of construction division in our sum- of-parts valuation. We see that listing of healthcare division will provide catalyst in the medium term. We maintain our NEUTRAL call on Sunway Berhad as we think positives are largely priced in at this juncture.

Source: MIDF Research - 29 Aug 2024