Sunway’s 4Q14  results  exceeded  our  and  market  estimates,  driven  by all  three  core  divisions.  Maintain  BUY,  with  our  SOP-based  TP  at MYR3.90  (17%  upside).  The  listing  of  Sunway  Construction  remains  a key  catalyst  for  the  stock.  FY14  new  sales  hit  MYR1.7bn,  and management is maintaining the same sales target for FY15 on the back of MYR2bn worth of new launches.

Above  expectations.  Sunway’s  4Q14  results  beat  our  and  market expectations  by  13%  and  18%,  respectively.  The  strong  numbers  were driven  by  all  three  core  divisions  –  property  development,  property investment and construction. A 6-sen single-tier second interim dividend was declared, bringing full year DPS to 11 sen (FY13: 10 sen).  

MYR500m worth of new sales in 4Q14. Sunway chalked up new sales of MYR500m in 4Q14 from MYR393m in 3Q14, bringing FY14 total new sales  to  MYR1.7bn  –  which  was  slightly  lower  than  its  management’s target of MYR1.8bn. Sales in 4Q14 were mainly contributed by  Sunway Geo Residences 2, the Citrine offices and service apartments, as well as Sunway Velocity signature retail & offices. Management expects another MYR1.7bn  in  new  sales for FY15,  and has  targeted  to  roll out  MYR2bn worth of new projects. The key ones include Sunway Damansara Retail (GDV:  MYR250m),  South  Quay  Condo  (GDV:  MYR300m),  Sunway Iskandar  landed  homes  (GDV:  MYR300m),  and  Sophia  Hills  in Singapore (GDV: MYR600m by effective stake).

Forecast.  We  make  no  changes  to  our  earnings  forecasts.  Its  unbilled sales  declined  slightly  to  MYR2.5bn  in  4Q14  from  MYR2.8bn  in  3Q14. Meanwhile,  its  construction  orderbook  stood  at  MYR3bn,  vs  MYR3.3bn in  3Q14.  As Sunway’s orderbook replenishment lagged  behind  in  FY14 due  to  timing  issues,  we  believe  the  value  will  be  topped  up  more substantially this year. 

 Maintain BUY. We maintain our BUY rating and MYR3.90 SOP-derived TP.  The  listing  of  Sunway  Construction  Group  (SCG)  remains  the  key share price catalyst. We reiterate that the dividend angle is attractive, as cash dividend plus dividend-in-specie could amount to about 40 sen, on top  of  the  normal  single-tier  dividend  of  11  sen.  The  key  risk  is,  of course, the termination of the exercise – which could only happen if the broad equity market sentiment dramatically turns negative.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Sunway is a well-known developer in the Klang Valley. Its flagship project, Bandar Sunway, is a well-established integrated township as the company successfully transformed mining land to a mature residential and commercial cluster.

Recommendation Chart

Source: RHB