CEO Morning Brief

Analysts Upbeat on Sunway's Outlook

Publish date: Fri, 24 Nov 2023, 08:50 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 23): Analysts are upbeat on Sunway Bhd's outlook, given strong growth prospects in its healthcare and property segments and Singapore projects.

In a research note on Thursday, MIDF Research upgraded Sunway Bhd to a “buy” call with a higher target price (TP) of RM2.25 as it anticipated stronger earnings growth for the group in financial year 2024 (FY2024).

Similarly, TA Securities maintained its “buy” rating on the group with an unchanged TP of RM2.40, based on sum-of-parts (SOP) valuation.

CGS-CIMB, on the other hand, reiterated its “add” stance for the group with an unchanged TP of RM2.57, using the same derived-part valuation.

According to MIDF, Sunway’s optimistic outlook is supported by expected earnings from its Singapore projects, particularly Parc Central, which is projected to contribute RM1.2 billion in revenue to the group over the next three years.

Meanwhile, CGS-CIMB said that despite slower progress of Sunway’s Singaporean private condominium projects, the group may benefit from increased economic activity such as the Johor-Singapore special economic zone, the Johor Bahru-Singapore Rapid Transit System (RTS) Link (due to open in 2026) and the possible revival of the Kuala Lumpur-Singapore High Speed Rail (HSR).

The research house added that the strengthening domestic economy is expected to benefit Sunway going forward, with the group’s leisure, hotel and healthcare segments seen benefitting from the improvement of inbound leisure tourism and medical tourism sectors as international travel continues to normalise.

Likewise, MIDF said the group’s healthcare division is expected to remain resilient, driven by the organic growth of the Sunway Medical Centre in Subang Jaya and the contribution from the Sunway Medical Centre in Penang.

Sunway’s property investment division is also expected to see improved earnings on an increase in tourist arrivals and a recovery in domestic tourism, MIDF added.

Furthermore, the potential listing of its healthcare division by 2027 is expected to unlock the value of its healthcare division, estimated to be worth at least RM7 billion to RM8 billion or RM1.40 to RM1.60 per share, based on a similar valuation of Ramsay Sime Darby Healthcare.

MIDF revised the group’s financial earnings for FY2023f at an increased 13.5%, FY2024f at 16.6% and FY2025f at 18.5%, driven by the higher contribution from the healthcare and property development division.

Meanwhile, TA Securities maintained its sales projection for Sunway at RM2.4 billion for FY2023, RM2.5 billion for FY2024 and RM2.6 billion for FY2025, attributing these to Sunway’s unbilled sales of RM4.6 billion and an outstanding construction order book of RM3.7 billion from external jobs that may contribute to the group’s earnings visibility for the next three to four years.

At the time of writing, shares of Sunway were up one sen or 0.52% to RM1.95, valuing the group at RM9.91 billion.

Source: TheEdge - 24 Nov 2023

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