KEY INVESTMENT HIGHLIGHTS

• FY19 earnings within expectations

• Earnings improved in FY19

• FY19 new sales at RM1.55b

• New sales target at RM2b for FY20

• Earnings estimates revised upwards

• Maintain NEUTRAL with an unchanged TP of RM1.72

FY19 earnings within expectations. Sunway Berhad (SUNWAY) FY19 core net income of RM655m came in within our and consensus expectations, making up 104% and 101% of our and consensus full year estimates respectively. Dividend of 4.5sen per share was announced, bringing total dividend to 9.1sen in FY19. This translates into dividend yield of 5.1%.

Earnings improved in FY19. SUNWAY recorded flattish core net income of RM170m (-1.5%yoy) in 4QFY19, bringing cumulative earnings to RM655m (+13.4%yoy) in FY19. The improved earnings in FY19 were mainly underpinned by higher contribution from property development division and healthcare division. Operating profit of property development division climbed 38%yoy, thanks to higher progressive profit recognition from local development projects and partial earnings recognition of its projects in China. Meanwhile, operating profit of healthcare division improved by 13.6%yoy due to higher outpatient treatments and strong performance from Sunway Medical Centre.

FY19 new sales at RM1.55b. SUNWAY registered new property sales of RM450m in 4QFY19, higher than new sales of RM365m in 3QFY19. That brought total new sales to RM1.55b in FY19 which is ahead of management sales target of RM1.3b. Looking ahead, management set a higher new sales target of RM2b for FY20 on the back of planned launches with total GDV of RM3.5b in FY20. On another hand, unbilled sales declined marginally to RM2.7b in 4QFY19 from RM2.8b in 3QFY19, providing 5 years earnings visibility to the property development division.

Maintain NEUTRAL with an unchanged TP of RM1.72. We revise upwards our FY20F earnings forecast by 1.8% as we factor in higher sales achieved in FY19. We also introduce our earnings forecast for FY21F. We maintain our TP at RM1.72, based on sum-of-parts valuation. While we see stable earnings outlook for SUNWAY, we think that the positives have been priced it. Hence, we maintain our Neutral call on SUNWAY.

Source: MIDF Research - 26 Feb 2020