This article first appeared in The Edge Financial Daily on January 15, 2019

Sunway Bhd
(Jan 14, RM1.50)
Maintain buy with a higher fair value of RM1.72: During a recent engagement with Sunway Bhd, management provided us with updates on its latest developments. Sunway’s property division is targeting new sales of RM1.3 billion for the financial year 2019 (FY19), 28% lower than actual new sales of RM1.8 billion in FY18. The company has also lined up several launches in 2019 with a combined gross development value (GDV) of RM2 billion.

In the central region, projects slated for launch this year are Sunway Velocity TWO’s phase two, a high-rise residential undertaking with a GDV of RM300 million; the high-rise residential Sunway Avila with a GDV of RM230 million; and Sunway GEOLake Residences comprising townhouses with a GDV of RM100 million. In Ipoh, Perak, the high-rise residential Sunway Onsen Suites have a GDV of RM120 million.

In the southern region, Sunway will roll out the phase three of Sunway Citrine Lakehomes; Iskandar townhouses with a GDV of RM100 million; the landed residential Sunway Lenang Heights with a GDV of RM150 million; and the high-rise residential Brookvale, Clementi in Singapore with a GDV of RM1 billion.

Based on the latest updates from management, Sunway chalked up new sales of RM1.8 billion in 2018, exceeding its target of RM1.7 billion. The company launched several projects in 2018 with a combined GDV of RM2.1 billion — the high-rise residential Rivercove Residences EC in Singapore with a GDV of RM590 million; the high-rise residential Sunway GEOLake with a GDV of RM480 million; the landed residential Sunway Citrine Lakehomes phase two in Sunway Iskandar with a GDV of RM80 million; the high-rise residential Sunway Gardens, Tianjin in China with a GDV of RM600 million; and Sunway Velocity TWO’s phase one, a high-rise residential project with a GDV of RM320 million. These well-received launches have average take-up rates and bookings of more than 80%.

Sunway’s balance sheet remains healthy with a net gearing ratio of 45% as of the cumulative nine months of FY18. With the capital expenditure requirement for its healthcare business’ expansion and ongoing property developments, we expect net gearing to stay above 45% in the next three years.

We believe the outlook for Sunway remains positive premised on its unbilled sales of RM2.1 billion, a strong income contribution from property investments and a robust outstanding order book for construction of RM5.2 billion. We maintained our “buy” recommendation. — AmInvestment Bank, Jan 14