Sunway Group’s (SWB MK) 4Q23 core net profit of MYR187.2m (-4% YoY, +4% QoQ) was in line, Maybank Investment Bank Berhad (Maybank IB) cited today (Feb 22).
Last year the group locked-in sales of MYR2.4b which were 4% above its FY23 sales goal of MYR2.3b (+20% YoY) but in line with Maybank IB’s sales assumption. The management has now set a higher sales target of MYR2.6b (+8% YoY) for FY24.
Maybank IB has raised their earnings forecasts by 2-6% along with their TP to MYR3.03 TP (+101sen) based on 0.8x P/RNAV (from 0.9x FY24E PBV) and upgrades the stock to BUY.
Results review
Sunway’s 4Q23 net profit of MYR187m lifted FY23 core net profit to MYR659m (+4.7% YoY), accounting for 96%/100% of our/consensus’ FY23E – in line.
All business divisions reported stronger earnings in FY23 except for healthcare and other business. Sunway has declared a second interim DPS of 3.5sen (YTD: 5.5sen [+0% YoY]).
As at Dec 2023, net gearing was 0.49x (improved from 0.55x in end-3Q23). The group has set MYR2.6b sales target for FY24 Sunway has locked in MYR2.4b property sales in FY23, or 4% above its FY23 property sales target.
Of the MYR2.4b, 39% was from its JV projects in Singapore, 7% from China, 7% from Johor and the remaining from the Klang Valley. Sunway has set a higher sales target of MYR2.6b for FY24 (+8% YoY).
Effective unbilled sales were MYR3.6b as at Dec 2023 (3.5x FY24E property revenue). Elsewhere, 64%-owned Sunway Construction Group (SCGB MK; SELL; CP: MYR2.61, TP: MYR2.30) has secured MYR2.5b worth of jobs in 2023, sustaining its outstanding orderbook of MYR5.3b as at Dec 2023.
Earnings adjustments
Maybank IB has adjusted their FY24/25 earnings forecasts by +1.7%/+5.7% to factor in: i) FY24E sales assumption of MYR2.6b, ii) change in SCGB’s earnings forecasts iii) the change in progress billing assumptions, and iv) actual FY23 results.
Maybank IB now values Sunway based on 0.8x P/RNAV. The change in valuation methodology is to better reflect the upcoming IPO listing of its healthcare business by 2025-2026, at the earliest.
