Review

• Sunway’s FY23 core net profit of RM653.2mn came in within expectations, accounting for 98% and 97% of ours and consensus’ full-year forecasts, respectively. We derived our core net profit after excluding 1) the provision for impairment on investment in an associate of RM3.1mn, 2) fair value gain on investment properties of RM67.9mn, and 3) a reversal of provision for impairment of assets of RM19.8mn related to the spun pile operation under the building materials segment.

• A second interim dividend of 3.5sen/share was declared in 4Q23, bringing the full-year dividend declared to 5.5sen/share. This maintains the same dividend quantum as declared in FY22.

• YoY: FY23 revenue reached a record high of RM6.1bn, marking an 18% YoY increase. However, core net profit showed a more moderate 7% YoY growth at RM653.2mn, primarily due to higher finance costs. The property development segment notably contributed to this performance, with a 22% rise in revenue and a 36% surge in PBT. The growth was supported by strong property sales, increased progress billing from ongoing and new local development projects, and the recognition of a RM46.3mn share of development profit from Parc Canberra in Singapore upon completion in 3Q23.

• QoQ: Sunway’s 4Q23 core net profit decreased by 1.2% QoQ to RM178.2mn, despite a robust 21% growth in revenue. The decrease in sequential earnings can be attributed to the preceding quarter’s strong earnings from JVs, which were boosted by the lumpy recognition of the share of development profit of Parc Canberra.

• Sunway's 4Q23 property sales experienced a 40% decline both YoY and QoQ, totaling RM353mn. However, FY23 sales jumped 21% YoY to RM2.44bn, surpassing the management's target of RM2.3bn but aligning with our sales assumptions of RM2.4n. Notably, Singapore projects accounted for 39% of the total sales in FY23.

Impact

• Upon factoring in the actual FY23 results and revising our sales assumptions to RM2.6bn for FY24 (previously RM2.5bn), our earnings projections for FY24 and FY25 are adjusted higher by 2.5% and 3.9%, respectively. Additionally, we introduce our FY26 net profit forecast of RM872.7mn, reflecting EPS earnings growth of 5.3% YoY, driven by new sales assumptions of RM2.7bn.

Outlook

• Sunway is targeting new sales of RM2.6bn this year (+6% YoY), underpinned by planned launches worth RM2.1bn – see Figure 1 and other existing projects. Of the RM2.1bn new launches, 88% are comprised projects in Malaysia, with the balance 12% from China.

Source: TA Research - 22 Feb 2024