We raise our fair value to MYR4.56 and reiterate our Buy rating. 1Q13 results came in within expectations, considering that 1Q is typically the weakest quarter. Stronger growth from the construction division was offset by the slower growth in all other divisions. Property sales amounted to MYR238m vs. management’s target of MYR1.3bn. We are not concerned as we expect sales to pick up in the coming quarters. 
 
-  Within expectations. Sunway’s 1Q13 results came in within expectations, considering that 1Q is typically the weakest quarter. The sequential decline in earnings was mainly due to the slower growth in property development, investment and other divisions, which has offset the stronger growth from the construction division. We believe the slower progress billings were attributed to the shorter working days in 1Q, while the drop in property investment division was mainly due to the holiday seasons in 4Q12, which saw higher occupancy in hotels and visitorship to themeparks.

-  MYR238m property sales in 1Q. Although the property sales in 1Q appear weak, we believe sales will pick up in the coming quarters, as there will be more launches/new phases coming up. These include Sunway Bukit Lenang, Sunway Eastwood, Sunway GEO and Sunway 
Velocity serviced apartment. The Novena project in Singapore is likely to be rolled out in 2H13, as well as the Phase one of Sunway Iskandar. Key projects contributed to 1Q are South Quay (Sunway GEO), the Singapore projects, Sunway Eastwood, Suria Shah Alam, Sunway Velocity, Sunway Damansara and etc.

-  Forecasts. Unchanged. Earnings visibility is strong given the current unbilled sales of MYR2.3bn (vs MYR2.78bn in 4Q12), and all-time-high construction orderbook of MYR4.4bn.

- Fair value raised to MYR4.56. We raise our fair value to MYR4.56 (from MYR4.28), at a lower 15% discount to RNAV (from 20%). Note that, the market is currently valuing UEMLD at 29x FY13 PE. Sunway, in comparison, is still trading at 13.1x FY13 PE. Both are big-cap Iskandar plays. Stripping off the equity valuations of Sunway REIT, all other business divisions are valued at only 10.8x. Maintain BUY.

Source: RHB