Sunway’s unbilled sales improving
PETALING JAYA: Despite lower earnings, the outlook still looks bright for Sunway Bhd, premised on the group’s improving unbilled sales and robust outstanding order book.
With unbilled property sales of Rm2.6bil and a construction orderbook of Rm5.4bil as of end-march 2020, earnings visibility remains intact, said Kenanga Research in a report yesterday.
“We continue to like Sunway for its diversified earnings base, with the resiliency of its real estate investment trust and healthcare businesses providing stability to counter the cyclical nature of the property development and construction segments over the longer term.
“We have upped our target price from RM1.45 to RM1.63 after raising our price-to-book value multiple to 0.95 times based on the mean valuation, to reflect a potential recovery from its beaten-down 2020 earnings.”
UOB Kay Hian said the group’s outstanding orderbook backlog of Rm5.4bil provided earnings visibility for its construction arm, Sunway Construction Group Bhd (Suncon), for the next three to four years.
“Year-to-date, the company has secured new contracts worth Rm688mil from construction and precast projects. Suncon expects to secure new orders worth Rm2bil in 2020, mainly of internal and external construction works.”
Hong Leong Investment Bank Research meanwhile said it expects 2020 to be a challenging year for the group, with the hospitality and leisure operations to be likely hit the hardest.
“Nonetheless, Sunway has activated its business continuity plan which incorporated its digital platform to facilitate the operational disruptions of the movement control order while several cost-saving measures have been carried out, including recruitment freezes.
“On the property front, the recent digital campaign which was rolled out towards end-april recorded Rm200mil in bookings within a month. Furthermore, we gather that several local projects which have gotten the necessary approvals have resumed construction work. Sunway is also expected to recognise Rm160mil of profit from the handover of its projects in Singapore and China.”
Sunway began its current financial year with a 42.6% year-on-year (y-o-y) drop in net profit in the first quarter. It said in a stock exchange filing earlier this week that it had recorded a net profit of Rm78.29mil as compared to Rm136.41mil in the same quarter a year earlier.
The drop in profitability was a result of the lower contributions from most of Sunway’s business segments except property development and quarry.
Meanwhile, the group’s revenue in the January to March 2020 period also declined by 13.5% y-o-y to Rm971.44mil, down from Rm1.12bil a year earlier.
Affin Hwang Capital said it is maintaining its hold call on the stock with a higher target price of RM1.61. “We raise our fully-diluted realised net asset value per share to RM2.31 from RM2.25 to reflect our higher target price for Suncon.”
“We continue to like Sunway for its diversified earnings base and resilience.” Kenanga Research