CGSI Research projects Sunway to record a strong first quarter of financial year 2024.
PETALING JAYA: Sunway Bhd
is on the cusp of another earnings upswing, says CGS International (CGSI) Research, after the conglomerate’s revenue for financial year 2023 hit the highest figure since its listing in 2011.
The research house projects Sunway to record a strong first quarter of financial year 2024 (1Q24), underpinned by its property business.
This is considering the timing of revenue recognition for Sunway’s Parc Central executive condominium (EC) project in Singapore, that will be booked in 1Q24.
The project has a gross development value of S$885mil, of which Sunway’s stake is RM940mil with estimated profits of RM109mil.
CGS-CIMB Research noted that Sunway has set its property pre-sales target for FY24 at RM2.6bil, which is an increase of 7% year-on-year, with RM2.1bil in launches.
The target is higher than the RM2.44bil sales Sunway achieved in FY23.
“We expect more meaningful pre-sales growth only in FY25 once its two Tengah EC Singapore projects are launched and there is further clarity on the zoning of the Southern Economic Zone paving the way for more launches in Johor.
“Subsidiary Sunway Construction Group Bhd (SunCon) announced a RM720mil construction project for Sunway Ipoh Mall from Sunway.
“This brings SunCon’s year-to-date wins to RM831mil, within our FY24 new order wins of RM3.9bil.
“For Sunway Healthcare Group, we believe the next leg of growth will be anchored by internal expansion at its three hospitals and a visible pipeline of new hospitals, namely Sunway Medical Centre (SMC) Ipoh and SMC Damansara, which will add a combined 600 beds between 4Q24 and 1Q25,” stated CGS-CIMB Research.
In a separate note, Kenanga Research said that Sunway’s results for FY23 met market expectations, supported by a stronger performance across the board for the group as whole.
Following the results announcement, Kenanga Research raised its FY24 earnings forecast by 2% and its target price by 11% to RM2.51 per share.
However, it maintained its “underperform” call on the stock.
“Sunway’s FY23 core net profit of RM686.4mil beat our forecast by 12% but only met market expectations.
“The variance against our forecast primarily stemmed from stronger-than-anticipated performances in property development and property investment, as well as contributions from its associated entities.
“Sunway’s fundamentals are soundly backed by a diverse portfolio of growing businesses but we believe these have already been priced in,” the research house said.
RHB Research, which has a “buy” call on Sunway, also raised its earnings forecasts for FY24 and FY25 by 12% and 14%, respectively.
This was in view of the strong earnings prospects from the group’s healthcare, construction, and property development segments.
“We like Sunway not only for its strategic exposure in Iskandar Malaysia and the upcoming listing of its healthcare unit, but also for SunCon’s promising job prospects.
“Our higher target price of RM3.53 reflects our latest target price for SunCon,” the research house said.
RHB Research also pointed out that Sunway reported encouraging sales in 2023.
Last year’s property sales reached RM2.44bil, of which Singapore projects contributed RM944mil, compared with 2022’s RM2.02bil.
“Sales for Terra Hills and The Continuum in Singapore were slow, as the take-up rate for Terra Hills stayed at 39%, while The Continuum improved slightly to 37% from 33% in 3Q23, as tightening measures were announced in April 2023 after both projects were launched.
“However, the company’s projects in Johor saw encouraging sales,” the research house added.
Meanwhile, TA Research said that out of Sunway’s RM2.1bil in new launches for 2024, 88% are projects in Malaysia, with the remaining 12% in China.
Looking ahead, the research house expects the upcoming Rapid Transit System (RTS) rail link and the potential establishment of the special economic zone in Johor to be positives for Sunway City Iskandar Puteri, which is positioned strategically between Puteri Harbour and the Second Link to Singapore.
“The positive sentiment is already evident in the strong sales performance of Sunway Aviana, a landed development within Sunway City Iskandar Puteri, launched in October 2023, achieving an impressive 99% and 83% take-up rate for the first and second phases, respectively,” the research house said.
