(Nov 22, RM1.78)
Maintain neutral with a higher target price (TP) of RM1.72: Sunway Bhd’s first nine months of financial year 2019’s (9MFY19) core net income of RM485 million came in within expectations, meeting 77% and 78% of our and consensus full-year estimates respectively.
The group’s third quarter of FY19’s (3QFY19) core net income is higher at RM183.4 million (+26.2% year-on-year [y-o-y]), bringing cumulative core net earnings to RM485 million (+19% y-o-y) in 9MFY19. The higher earnings were mainly contributed by healthcare and property investment division. Operating profit of healthcare division grew 33.1% y-o-y due to higher occupancy rate and higher outpatient treatments.
Similarly, operating profit of property investment division climbed by 12.8% y-o-y due to higher contribution from its hospitality properties. Meanwhile, operating profit of property development division fell by 10.7% y-o-y mainly due to lower progress billings from local development projects.
Sunway recorded new property sales of RM365 million in 3QFY19, lower than new property sales of RM472 million achieved in the previous quarter. That brought cumulative new property sales to RM1.1 billion in 9MFY19. Meanwhile, management is maintaining its new sales target of RM1.3 billion for FY19.
On the other hand, unbilled sales increased marginally to RM2.8 billion in 3QFY19 from RM2.7 billion in 2QFY19, providing three years earnings visibility to the property development division.
We revise our TP to RM1.72 from RM1.56 as we rollover our valuation to FY20. Our TP is based on sum-of-parts. We reiterate our “neutral” call on Sunway due to limited upside. — MIDF Research, Nov 22