• Maintain BUY and MYR2.06 TP, 34% upside with c.3% FY22F yield. Yesterday, Sunway’s investor relations team hosted its second corporate day event with a sustainability theme. This time, its Chief Sustainability Officer Ong Pang Yen shared details on the group’s sustainability journey and goals towards achieving net zero carbon by 2050. We came away impressed with the group’s initiatives and advancements in its long-term sustainability plan. Note that Sunway has the highest ESG score among the property stocks under our coverage.

• Getting around. We were taken on a tour of Sunway City Kuala Lumpur to experience the integrated nature of the city. Travellers can use the world’s first all-electric bus rapid transit (BRT) system, which is interconnected with the Kelana Jaya light rail transit and Keretapi Tanah Melayu or KTM lines. The BRT-Sunway Line has stations near Sunway Medical Centre, Sunway University, Sunway Pyramid, and residential areas. There is also convenient accessibility by foot – thanks to its Canopy Walk, an elevated, covered walkway that is connected to key locations within the city. Underground, the integrated car park is connected to Menara Sunway, The Pinnacle Sunway, Sunway Resort Hotel, Sunway Pyramid Mall, and Sunway Pyramid Hotel.

• Closing the loop. Sunway has two composting machines located at Sunway Resort and Sunway Pyramid, which it installed in 2019. The investor relations team highlighted the educational efforts that it took to train tenants and staff to separate food waste to make this possible. The compost is passed on to landscapers, to be used around the city. We were also brought to Sunway XFarms’s urban farm that grows pesticide-free produce. The urban farm reduces the distance travelled to procure vegetables for Sunway’s hotels, and the produce is also sold to the local community through a subscription programme. Sunway also has a water treatment plant at South Quay Lake that helps to ensure water security, supplying 8.5m litres of water daily which is enough for 51,500 people.

• Long-term goals. Sunway aims to reduce residual emissions by 45% by 2030 (using 2010 as base), reporting its scorecard towards its targets annually. One of the implementations to achieve this goal is its internal carbon pricing, currently priced at MYR15 per tonne of C02 emitted above a set threshold. Sunway will also look to reduce Scope 3 emissions through sustainable procurement and supply chain practices, as well as green leases to align the group’s energy efficiency goals with tenants. Finally, to achieve net zero carbon emissions by 2050, Sunway will focus on carbon offset technology through carbon capture and large-scale renewable energy. Currently, 2,700 MWh of solar energy is generated in Sunway City Kuala Lumpur.

Source: RHB Research - 16 Nov 2022