Sunway Bhd -
Share price: MYR2.65
Target price: MYR2.52 (under review)
Maintain SELL. Sunway’s 9M13 core net profit of MYR325.4m (+38% YoY) came in above expectations. Management has expressed caution over the property market outlook over the next 6 months following the new property cooling measures at Budget 2014 and it intends to switch its focus to commercial properties in the Klang Valley. We are reviewing our earnings forecasts and MYR2.52 TP (0.58x P/RNAV; MYR4.34 RNAV) pending further details on 2014 new launches.
Results above expectations. 3Q13 core net profit of MYR124m (+32% YoY, 12% QoQ), lifted 9M13 earnings to MYR325m (+38% YoY), making up 81-86% of our and consensus full-year forecasts. We reckon the earnings gap was due to stronger-than-expected progress billings from property development. The YoY growth in earnings was mainly driven by: 1) MYR1.8b in unbilled sales achieved in 6M13 and 2) MYR4.2b outstanding construction orderbook as at Aug 13.
Medini project is delayed to 1H14. Sunway has raked in MYR836m in effective property sales in 9M13 or 76% of its MYR1.1b sales target for 2013. We think there is a chance for Sunway to exceed its target for 2013 given the strong take-up in the recent launch in Geo Residences thanks to attractive incentives offered (DIBS, 10% discount). Sunway has delayed the maiden launch of Sunway Medini Iskandar to 1H14 due to weaker sentiment on Iskandar Malaysia post-Budget 2014.
Support from the construction division. At end-Sep 2013, Sunway’s outstanding order book was MYR3.7b (2.3x of our construction revenue forecasts), providing medium-term earnings visibility. This year, it has secured MYR2b worth of construction works, including the MYR526m KLCC and MYR452m bus rapid transit works.
Cautious outlook. We retain our cautious outlook on the property sector (especially on luxury properties) in view of the new cooling measures in Budget 2014. Property unbilled sales stood at MYR1.8b at end of 3Q13 (1.1x our FY14 revenue forecasts)
Publish date: 02/12/13