Review

• Stripping off the exceptional items amounting to RM96.0mn, Sunway’s 9M24 core net profit of RM722.8mn (+52% YoY) exceeded expectations, accounting for 92% and 89% of ours and consensus’ full-year forecasts, respectively. The outperformance was largely due to stronger-thanexpected performance from the property development and healthcare segments.

• YoY: In 9M24, revenue rose 18% YoY to RM5.0bn, while core PBT jumped 45% YoY to RM934.4mn, driven by strong performance across key segments. Property development PBT more than doubled, supported by higher sales and progress billings from local projects, along with RM124.0mn in deferred profits from Parc Central Residences, a Singapore project completed in July 2024 under a 35:65 JV with Hoi Hup Realty, in line with MFRS 15. Property investment PBT increased 29%, driven by higher theme park visitors, better hotel occupancy, and stronger investment asset revenue. Healthcare PBT grew 34%, reflecting improved hospital operations, increased licensed beds, and higher patient census.

• QoQ: In 3Q24, revenue increased by 28%, driven by stronger contributions across most business segments, despite a slight decline in the others segment. Core net profit more than doubled to RM376.1mn, primarily due to a higher share of JV profits, including the recognition of approximately RM124mn in accumulated profits from the completion of Parc Central Residences in Singapore.

• Sunway’s 3Q24 property sales decreased 2% YoY and 25% QoQ to RM580mn. This brought the YTD 9M24 property sales to RM1.85bn, representing a 12% YoY decline. The Klang Valley region contributed 57% of total sales.

Impact

• No change to our FY24-26 earnings forecasts.

Outlook

• Sunway maintains its new sales target of RM2.6bn this year, with 9M24 sales already accounting for 71% of the target. Looking ahead, the group has lined up RM1.2bn worth of new launches for the 4Q24

• With unbilled sales of RM4.5bn and an outstanding construction order book of RM5.3bn (external jobs only), Sunway has earnings visibility for the next 3-4 years.

• In our view, Sunway is well-positioned to benefit from a strengthening domestic economy, with its retail, leisure, hotel, and healthcare segments poised for growth. Notably, the healthcare segment, a key driver, continues to expand capacity, with Sunway Medical Centre Penang adding 82 beds, bringing SHG’s total to 1,240 licensed beds as of 30 September 2024. The openings of Sunway Medical Centre Damansara in December 2024 and Sunway Medical Centre Ipoh in 1Q25 will grow Sunway Healthcare Group’s portfolio to five hospitals with around 2,500 beds. Supported by rising demand from an ageing population, noncommunicable diseases, and medical tourism, the healthcare segment is set to sustain strong performance.

• Looking ahead, we expect the completion of the Rapid Transit System rail link and the establishment of the Johor-Singapore Special Economic Zone to bode positively for Sunway City Iskandar Puteri (SCIP). The planned land sale in SCIP for data centre development, coupled with key projects such as the Equalbase-Sunway 103° Logistic Hub, Sunway Circuit, Puteri Hill, healthcare facilities, and a tertiary education institution, will strengthen SCIP’s ecosystem. These developments are set to enhance its appeal to high-income professionals and global corporations seeking regional headquarters.

Valuation

• We place our TP and recommendation under review pending more updates from an analyst briefing to be held later today.

Source: TA Research - 27 Nov 2024