Sunway announced a 26 sen special cash dividend following the successful listing of Sunway Construction. We maintain our BUY ratingbut with a revised TP of MYR3.86 (from MYR4.10, 14% upside), as we revamp our valuations after the corporate exercise. Going forward, while the property development segment is facing macro headwinds, we believe Sunway will continue to deliver decent earnings growth, given its integrated and well-diversified business structure.

26 sen special cash dividend. Following the listing of Sunway Construction (SCGB MK, NR) in end-July, Sunway announced a 26 sen special cash dividend. This is in line with our expectation. The entitlement date of the dividend is set to be 2 Oct 2015, while payment date will be on 16 Oct 2016. This year, Sunway is paying a handsome dividend to shareholders. Thus far, apart from this 26 sen special dividend, it has also paid a 12 sen dividend-in-specie, and 5 sen interim dividend (total 43 sen). Based on yesterday’s closing price, this translates into an attractive yield of 12.7%.

Adequate business structure brings earnings resilience. Looking ahead, while the property development segment is currently experiencing unfavourable macro headwinds, we believe Sunway has the right business structure to mitigate the downside risk. The resilience is proven, given Sunway’s earnings track record since 2010/2011. While the 54.4%-owned Sunway Construction has an orderbook of MYR2.69bn, the property investment and 34%-owned Sunway REIT (SREIT MK, NEUTRAL, TP: MYR1.64) will provide stable and recurring income and cash flow to the group. Matur ed assets also get to be monetised if they are injected into the REIT. In addition, although 1H new property sales have only achieved MYR478m, the potential sale of unsold inventory in Singapore could potentially boost new sales in 2H, thus achieving its MYR1.7bn sales target for the year.

Maintain BUY. As a result of the listing and the confirmed special cash dividend, we revamp our valuations. As such, our TP is revised down to MYR3.86 (from MYR4.10), based on a 30% discount to RNAV plus a 26 sen DPS. We maintain our BUY rating on the stock.