SUNWAY BHD

By CIMB Research Add (maintained) Target price: RM3.91

WITH Q1 FY17 being a traditionally weak quarter for Sunway Bhd, CIMB Research expects better quarters ahead on the back of stronger billings from its construction division.

The group’s annualised core net profit for the quarter made up 77% of its full-year forecast and 74% of consensus.

“We deem the results broadly in line as Q1 is traditionally a weaker quarter,” the research house said in a note.

It noted that net profit grew 5.7% year-onyear despite the contraction in property development earnings, as it was largely driven by a robust construction pre-tax margin of 12%.

Property pre-tax profit for the quarter contracted 64% year-on-year as the Avant project was completed and fully sold in FY16, while new ventures have yet to contribute to earnings.

“Though construction pre-tax profit dropped 2% year-on-year, the flattish pre-tax margin of 12% implies that higher-margin jobs are likely to flow through in the coming quarters, offsetting the lower but still commendable 17% property margin,” the research house noted.

CIMB Research said Sunway’s RM1.1bil sales target for FY17F was intact as the group achieved RM125mil in effective property sales during the latest quarter.

“We gather that out of the RM2bil worth of launches slated for this year, 50% are priced below RM1mil, given the still-challenging property market.

“Also, integrated development properties form a large portion of the launches this year,” it said.

As at end-Q1 FY17, effective unbilled sales stood at RM1.1bil. Sunway Construction’s order book, meanwhile, stood at RM4.6bil as at end-Q1 FY17.