KEY INVESTMENT HIGHLIGHTS

• 9MFY24 earnings above expectations
• Lumpy earnings recognition from Singapore project
• 9MFY24 new property sales at RM1.85b
• Earnings forecast revised upwards
• Maintain BUY with a revised TP of RM4.92

9MFY24 earnings above expectations. Sunway Berhad 9MFY24 core net income of RM734.5m came in above expectations, making up 91% and 88% of our and consensus full year estimates respectively. The positive deviation was mainly attributed to the stronger than expected earnings contribution from property development division.

Lumpy earnings recognition from Singapore project. On sequential basis, 3QFY24 core net income jumped to RM346.8m (+58.9%qoq) as earnings were boosted by higher contribution from property development division. Profit before tax (PBT) of property development division surged by 164%qoq mainly due to lumpy earnings recognition from Parc Central Residences in Singapore which was completed in July 2024. The higher sequential earnings were also driven by higher contribution of healthcare division (+27.8%qoq) as performance of three operating hospitals improved.

Stellar earnings. On yearly basis, 3QFY24 core net income was higher (+80.8%yoy), bringing 9MFY24 core net income higher at RM734.5m (+44.8%yoy). The higher earnings were underpinned by improved earnings contribution from most of its core business divisions namely property development, property investment, construction and healthcare.

PBT of property development division was higher (+106%yoy) due to higher earnings recognition from local projects and lumpy earnings recognition from Singapore project. Similarly, PBT of property investment division was higher (+48%yoy) due to better performance of theme park, hotels and malls. Meanwhile, healthcare division was resilient mainly due to increased licensed bed from SMC Penang.

9MFY24 new property sales at RM1.85b. Sunway Berhad recorded new property sales of RM550m in 3QFY24, lifting total new sales to RM1.85b in 9MFY24 which made up 71% of new sales target of RM2.6b.

Moving forward, new sales momentum in 4QFY24 is expected to sustain by planned launch with total GDV of RM1.2b in 4QFY24. Planned launches in 4QFY24 are Novo Place (GDV: RM918m) in Singapore, Sunway Bayu (RM106m) in Perak, Sunway Wellesley (GDV: RM129m) in Penang and Sunway Gardens (Phase 3) (GDV: RM74m) in China. Meanwhile, property unbilled sales were unchanged at RM4.5b in 3QFY24.

Maintain NEUTRAL with a revised TP of RM4.92. We revise our earnings forecast for FY24F/25F/26F by +14.3%/+3.8%/+4.4% as we factor in higher contribution from property development division. We revise our TP for Sunway Berhad to RM4.92 from RM4.24 as we update our SOP valuation. We are pegging 23x EV EBITDA to healthcare division in view of the stellar performance of the division. We continue to see that listing of healthcare division will provide catalyst in the medium term. Nevertheless, we maintain our NEUTRAL call on Sunway Berhad at this juncture as upside is limited.

Source: MIDF Research - 27 Nov 2024