Target Price: MYR3.52
Unexpected 5 Sen Interim Dividend
Sunway’s 2Q13 results came in above expectations. A 5 sen interim dividend was declared. The q-o-q earnings growth was mainly driven by higher progress billings from the property projects, partly offset by weaker revenue from the construction division. Its 1H13 new sales of MYR606m are on track to meet our target. In view of rising economic and regulatory risks, we lower our FV to MYR3.52. Maintain BUY.
• Above expectations. Sunway’s 2Q13 results came in above our and market expectations, on an annualised basis. The sequential growth in earnings was mainly driven by higher progress billings from projects in Sunway South Quay, Sunway Damansara, Sunway Velocity and Sunway Eastwood. However, the growth was partially offset by weaker revenue from the construction division. The LRT project was slightly delayed due to a stop-work order imposed on all contractors as a result of accidents at the work site of other packages undertaken by other contractors.
Meanwhile, the delay in the MRT project was largely due to adverse weather conditions. An unexpected 5 sen interim dividend was declared. From FY13 onwards, Sunway is likely to pay out its dividend twice a year, while keeping its minimum 20% dividend payout policy unchanged. This prompts us to adjust our DPS forecasts accordingly.
• MYR368m sales in 2Q13. New property sales in 2Q amounted to MYR368m, bringing 1H total to MYR606m. This was largely in line with Management’s MYR1.3bn target for the year. The recent launch of the semi-ds (from MYR1.5m onwards) and bungalows (from MYR2.2m onwards) in Ph. 1 Lenang Heights, with a GDV of MYR201m, has seen a take-up rate of about 50%. In the pipeline, Sunway plans to launch MYR1.25bn worth of projects, including Sunway Velocity serviced apartments & shops (GDV MYR200m), Sunway GEO condo (MYR150m), Medini serviced apartments and office, (MYR300m), Novena (MYR500m) and Sembawang terrace (MYR100m) in Singapore.
• Forecasts. We make no changes to our earnings forecasts. Earnings visibility remains strong given its unbilled sales of MYR2.2bn (from MYR2.3bn in 1Q13) and construction orderbook of MYR4.2bn.
• Lower FV of MYR3.52. In view of rising economic and regulatory risk, we lower our FV slightly to MYR3.52 (from MYR3.76), based on a larger 25% discount (from 20%) to RNAV. Maintain BUY.
Publish date: 02/09/13