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

Stock Name: SUNWAY
Company Name: SUNWAY BERHAD

Research House: OSK

Price Call: BUY

Target Price: 3.31

Sunway's FY11 results were  within ours but slightlyabove consensus expectations, with its FY11 core net profit making up about 103% and 107% of both forecastsrespectively. As the merger was only completed in August 2011, there is nomeaningful y-o-y comparison of its financial performance. We  are raising our FY12 net profit forecast by 4.0% and  introducing our FY13forecast. 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-  tobig-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 netprofit of RM325.6m for FY11  made up  103% and 107% of our and consensus FY11 netprofit forecasts. Collectively, its property development & investmentdivision was the biggest contributor to topline, accounting for about 38.4% oftotal revenue, followed by construction division, which contributed about 33.7%to revenue. However, due to  the  higher margin commanded by its propertydevelopment division  as well as  dividend income from Sunway REIT in theproperty investment division, these divisions collectively contributed some  82.3% of the core net profit while  the construction division  accountedfor  about 13.9% of group bottomline. Asthe merger was only completed in August 2011, there is no meaningful y-o-ycomparison for the group's financial performance.

Malaysia the biggestcontributor.  Geographically,Malaysia remained  the biggest contributorto group  topline and bottomline,  making up about  78.4% 70.8% of group revenue and net profitfor FY11 respectively. While revenue from Singapore only accounted for about5.3% of the total revenue, its contribution to the bottomline was much higherat 28.2% of FY11 net profit.  In  FY11, Sunway recorded total effective property sales of RM1.8bn, with unbilledsales  of RM1.8bn. For FY12, Sunway is expected to see  RM1.5bn of effectivelaunches, with targeted effective sales of RM1.4bn. Its construction orderbookcurrently totals RM2.84bn, which can last the group at least 2 years.

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

Source: OSK188