Sunway’s 3Q14 results came in within our expectation but above street estimate.  Maintain  BUY  with  a  MYR3.90  TP  (20.7%  upside).  New  sales fell slightly to MYR393m from MYR459m in 2Q. We believe the dividend angle  for  the  stock  may  have  been  underappreciated  by  the  market. With  the  listing  of  SCG,  shareholders  could  potentially  receive  a  cash dividend of 25-30 sen, on top of the normal dividend payout of 10 sen.  
 
Within  expectations.  Sunway’s 3Q14  results  came  in  line  with  our estimate but  exceeded market expectations. EBIT for the core divisions ie  property  development  and  property  investment  saw  an  encouraging growth, but was partly offset by weaker results from the construction and quarry divisions.   

MYR393m  new  sales  in  3Q.  New  sales  in  3Q  achieved  MYR393m, slightly  down  from  MYR459m  in  2Q,  bringing  9M  total  new  sales  to MYR1.2bn.  The  sales  were  mainly  contributed  by  V  Residence  2  @ Velocity  (MYR327m),  Geo  Residences  (MYR191m),  Geo  2  service apartments/South Quay (MYR165m) and Sunway Montana (MYR109m). Sunway should be on track to hit its MYR1.8bn sales target, as several new  projects  will  be  rolled  out  in  4Q.  These  include  Citrine  service apartment  (GDV:  MYR220m),  Sunway  Cassia  (GDV:  MYR70m)  and Sophia  Hills  condo  (GDV:  SGD720m).  The  bookings  in  Sunway  GEO Residences  2  and  Velocity  retail  shops  and  offices  will  continue  to  be converted into sales in 4Q as signing of sales and purchase agreements takes place.

Forecast.  We  make  no  changes  to  our  earnings  forecasts.  Unbilled sales inched up to MYR2.8bn  from MYR2.4bn in 2Q, while construction orderbook  stood  at  MYR3.3bn  (vs  MYR3.5bn  in  2Q14).  YTD,  the company  has  successfully  replenished  its  orderbook  by  MYR881m, largely from in-house property projects.   

Maintain BUY. We now prefer Sunway as our Top Pick for big caps. The dividend angle is attractive with the listing of Sunway Construction Group Bhd  (SCG),  as  cash  dividend  plus  dividend-in-specie  could  amount  to about  40  sen,  on  top  of  the  normal  single-tier  dividend  of  10  sen. Potential  injection  of  property  assets  into  the  REIT  could  further contribute  to  the  dividend  pool.  All  these  could  possibly  bring  dividend yield to >10%. Maintain BUY with a MYR3.90 TP

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Sunway  Berhad  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

Recommendation Chart

Source: RHB