• Maintain BUY with new TP of MYR3.53 (from MYR3.45), 30% upside, c.2% yield. Sunway’s 4Q23 results beat expectations, driven by strong growth from key business segments. For 2024, management has set a higher sales target of MYR2.6bn (vs MYR2.44bn achieved in FY23). We like Sunway not only for its strategic exposure in Iskandar Malaysia and the upcoming listing of its healthcare unit, but also for Sunway Construction’s (SCGB MK, BUY, TP: MYR3.34) promising job prospects. Our higher TP reflects our latest TP for SCGB.

• 4Q23 results. Property development, property investment, and construction divisions saw stronger revenue and EBIT, as billings were higher and occupancy and visitorship were much better during the quarter. JV income was higher in 3Q23 due to the recognition of MYR46.3m development profit as Parc Canberra in Singapore was completed. Meanwhile, share of net profit from the healthcare segment was lower QoQ, dragged by higher operating expenses, interest, and tax expenses. Note that Sunway Medical Centre Penang achieved breakeven at the PAT level during the quarter. A second interim dividend of 3.5 sen was declared, bringing full-year DPS to 5.5 sen (2022: 5.5 sen).

• Encouraging sales in 2023. New property sales reached MYR350m in 4Q23 vs MYR590m in 3Q23. Full-year property sales achieved MYR2.44bn (2022: MYR2.02bn), of which Singapore projects contributed MYR944m. Sales for Terra Hills and The Continuum in Singapore were slow, as the take-up rate for Terra Hills stayed at 39%, while The Continuum improved slightly to 37% from 33% in 3Q23, as tightening measures were announced in Apr 2023 after both projects were launched. However, projects in Johor saw encouraging sales. Bungalow units in Sunway Lenang Heights were 58% sold (launched in Nov 2023), while terrace homes in Sunway City Iskandar Puteri were 99% and 83% sold for Phase 1 and 2. Sunway plans to roll out MYR2.1bn worth of projects in 2024, including landed homes in Iskandar Puteri with a combined GDV of MYR345m, high-rise projects in Kelana Jaya (GDV: MYR455m), Bukit Jalil (GDV: MYR232m), and Taman Maluri (GDV: MYR566m).

• Forecast. Parc Central is expected to be completed in 1H24, and the accumulated progressive profits from this project stand at MYR108.9m. Unbilled sales and outstanding construction orderbook are at MYR4.06bn and MYR5.3bn vs MYR4.64bn and MYR5.8bn in 3Q23. In view of the strong earnings prospects from the healthcare, construction, and property development segments, we raise our FY24-25F earnings by 12-14%.

• ESG. Our SOP valuations include a 8% ESG premium.

Source: RHB Research - 22 Feb 2024