Sunway’s property sales on track to break target

Iconic Sunway pyramid's lion

PETALING JAYA: Sunway Bhd’s full-year prospects are expected to continue to be supported by strong property sales.

Sunway recorded property sales of RM1.16bil in the first quarter ended March 31,2021 (Q1), which are higher than new sales of RM357mil in the Q4 of financial year 2020 (FY20).

The exciting sales were mainly driven by projects in Singapore.

The strong sales in Q1 of FY21 would mean that full-year sales are on track to be above management’s full-year target of RM1.6bil.

While Sunway’s management is maintaining its sales target at the moment, MIDF Research reckoned that it may revise the sales target upwards later.

Note that unbilled sales increased to RM3.3bil in Q1 of FY21 from RM2.4bil in Q4 of FY20.

For Q1 of FY21, the group had registered a net profit of RM58.45mil, compared with RM62.4mil a year earlier despite a 4.7% increase in revenue to RM1.02bil.

The lower earnings, dragged by the property development and property investment divisions, notably came in below MIDF’s expectations.

“We revise our FY21/FY22 earnings forecast by -28.5%/-20.4% respectively to reflect the lower contribution from property development and property investment divisions, ” it said in a report.

The research house has kept its “neutral” rating on the stock with a target price of RM1.55 given the lack of an immediate catalyst in the near term.

However, RHB Research opined that the potential disposal of its minority stake in Sunway Healthcare could be a share price catalyst over the near term.

The research house also expects Sunway’s Q2 earnings to be much weaker due to the imposition of the movement control order 3.0 and has cut its FY21-FY23 earnings estimates by 32%-39%.

Nonetheless, it has maintained a “buy” recommendation on Sunway, albeit with a lower target price of RM1.92.

“Our valuation comprises a 40% discount to the revalued net asset value for the property business, 15 times price earnings ratio for the trading division, and 32 times for the healthcare segment.”

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