Sunway’s  4Q13  results  beat  expectations.  The  better  numbers  were driven  by  stronger  growth  in  all  core  divisions.  New  sales  were MYR1.8bn  in  FY13,  and  management  expects  to  repeat  the  same amount of sales in FY14. Also, a big construction contract is under way. We  maintain  our  BUY  rating  on  the  stock,  as  Sunway’s  diversified model helps cushion the temporary softening of the property market.

• Above  expectations.  Sunway’s  FY13  earnings  beat  our  and  market expectations.  Both  property  development  and  construction  divisions recorded >20% growth in operating profit.  Given the good set of results, a  final  single-tier  dividend  of  5  sen  was  declared  (6  sen  in  FY12), bringing full-year DPS to 10 sen, representing a payout of 36%.
• MYR1.8bn  sales  in  FY13.  Similar  to  FY12’s  level,  Sunway  made MYR1.8bn worth of new property sales  in FY13. Demand for most of its projects  were  encouraging,  with  Sunway  Geo  Residences  recording  a 90% take-up, Sunway Nexis almost 100%, and Royal Square @ Novena 50%. Going forward, management expects the same amount of sales for FY14.  This  is  a  decent  target,  in  view  of  the  pipeline  launches.  About MYR2.3bn  worth  of  projects  are  slated  for  launch  this  year,  including Sunway  Velocity  Residence  (GDV:  MYR250m),  Sunway  Geo  Serviced Apartments (MYR200m), Citrine Sunway Iskandar (MYR300), and Mount Sophia Singapore (MYR600m), which is located near  the Orchard Road shopping belt. Citrine, which comprises office and serviced apartments,is expected to be rolled out in 2Q, with an indicative pricing of close to MYR700 psf.  As for the construction division, management is confident of  hitting  a  new  orderbook  of  MYR2.5bn  this  year,  and  we  understand that the company is close to securing a big construction contract soon.
• Forecasts.  We raise our FY14  earnings forecast by  15%.  Earnings  are well-supported by  its  MYR2.4bn  unbilled sales  (MYR2.2bn in 3Q13) and MYR3.9bn  construction  orderbook.  The  group’s  dividend  payout  is expected to stay within the 20-30% range.
• Maintain  BUY.  Amid  the  challenging  market  environment,  Sunway stands out given its diversified business model that has helped cushion the temporary weakness in the property market. We maintain our BUY rating and MYR3.33 FV on the stock, at a 30% discount to RNAV.

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SWOT Analysis

Company Profile
Sunway  Bhd  is  a  well-known  developer  in  the  Klang  Valley.  Its  flagship  project,  Bandar  Sunway  is  a  well-established  integrated township. The company has successfully transformed a mining land to a matured residential and commercial cluster.

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Source: RHB