Share price: MYR2.97
Target price: MYR3.47 (from MYR3.48)
Expect Stronger Property Sales In 2H13
Maintain BUY. Sunway’s 1H13 results, to be released on 29 Aug, will likely meet expectations. Given strong property product launches in the pipeline (≈MYR1.5b new launches in 2H13), Sunway could exceed its internal sales target of MYR1.1b for 2013 (2012: MYR1.6b). We adjust our FY13/14/15 earnings forecasts by -1%/-1%/+4% to reflect the removal of its China project from our forecasts and higher stakes in Sunway Velocity (SV) and Sunway Iskandar (SI). Our TP is largely intact at MYR3.47 on an unchanged 20% discount to MYR4.34 RNAV.
To track expectations. We expect core net profit of MYR105-110m (+22% QoQ, +42% YoY) in 2Q13, lifting 1H13 earnings to MYR200m (+41% YoY), accounting for 50% of our full-year forecast. The better quarterly earnings will be underpinned by: 1) MYR1.6b in property sales achieved in 2012, 2) MYR4.2b outstanding construction orderbook as at today, and 3) strong net income growth in SunREIT (+15% YoY).
Likely to exceed its internal property sales target. Despite the lack of new launches in 1H13, Sunway has managed to lock-in ≈MYR300m in property sales in 2Q13, lifting 1H13 sales to ≈MYR500m, or 45% of its MYR1.1b sales target for 2013. We think there is a high chance for Sunway to exceed its internal target for 2013 given strong pipeline launches including SI’s phase 1 and the Novena project in Singapore.
Another MYR600m new construction works? Sunway has successfully bagged MYR1.76b of contracts YTD, lifting total outstanding order book to MYR4.2b, providing medium-term earning visibility. This is close to our MYR1.8b job win target for 2013. Hence we make no change to our assumptions. We understand that Sunway is currently bidding for another MYR600m worth of building works.
Earnings adjustments. We adjust our earnings forecasts to factor in: 1) the removal of Tianjin Eco City (China) from our forecasts due to potential delays in property launches and 2) higher 85% equity stake in SV (from 50%) and 45% in SI (from 38%). Our RNAV remains intact at MYR4.34. Sunway has relatively low foreign shareholding of 5.9% (excl. GIC) compared to its Iskandar peer, UEMS’s 20.4%.
Publish date: 27/08/13