SUNWAY (FV RM3.31 - BUY) FY11 Results Review: As Expected

Sunway’s FY11 results  were  within ours but slightly above consensus expectations, with its  FY11 core net profit making up about 103% and 107% of both forecasts respectively. As the merger was only completed in August 2011, there is no meaningful y-o-y comparison of its financial performance. We  are raising  our FY12 net profit forecast by 4.0%  and  introducing our FY13 forecast. We maintain our Buy call on Sunway, at an unchanged FV of RM3.31, based on a 20% discount to our SOP RNAV valuation. Sunway is our  top  pick  among  mid-  to big-cap  property  companies, backed by  its  attractive valuation and relatively defensive earnings  from its property investment segment.

Within our estimates  but above consensus. Sunway’s core net profit of RM325.6m for FY11  made up  103% and 107% of our and consensus FY11 net profit forecasts. Collectively, its property development & investment division was the biggest contributor to topline, accounting for about 38.4% of total revenue, followed by construction division, which contributed about 33.7% to revenue. However, due to  the  higher margin commanded by its property development division  as well as  dividend income from Sunway REIT in the property investment division, these divisions collectively contributed some  82.3% of the core net profit while  the  construction division  accounted for  about 13.9% of group bottomline. As the merger was only completed in August 2011, there is no meaningful y-o-y comparison for the group’s financial performance.

Malaysia the biggest contributor.  Geographically, Malaysia remained  the biggest contributor to group  topline and bottomline,  making up about  78.4% 70.8% of group revenue and net profit for FY11 respectively. While revenue from Singapore only accounted for about 5.3% of the total revenue, its contribution to the bottomline was much higher at 28.2% of FY11 net profit.  In  FY11, Sunway  recorded total effective property sales of RM1.8bn, with unbilled sales  of  RM1.8bn. For FY12, Sunway is expected to  see  RM1.5bn of effective launches, with targeted effective sales of RM1.4bn. Its construction orderbook currently totals RM2.84bn, which can last the group at least 2 years.

Maintain Buy. We maintain our Buy recommendation on Sunway at  an unchanged FV of RM3.31, based on a 20% discount to our SOP RNAV valuation. Sunway is our  top  pick  among  mid-  to  big-cap  property  companies,  backed by  its  attractive valuation as well as relatively defensive property investment  earnings. Adding  to  the  stock’s  appeal  is  its  construction  division’s  strong  orderbook replenishment.

Source: OSK188