AmWatch - Sunway : SCG 1H earnings beat expectations, 24 Aug 2015

STOCK FOCUS OF THE DAY

Sunway : SCG 1H earnings beat expectations     Buy

We maintain BUY on Sunway, with an unchanged fair value of RM3.74/share, based on a 20% discount to the SOP value of RM4.65/share. Its listed subsidiary Sunway Construction Group Bhd (SCG) posted a 2QFY15 core net profit of RM41.6mil (+21% QoQ), bringing the 1H15 core earnings to RM76mil – beating expectations. The 1H core net profit represents 65% and 58% of our and consensus estimates. The operating result was beyond expectations, with est. EBIT at 76% of our full-year forecast. No dividend was declared.

As at 30 June, 2015, the outstanding order book amounted to RM2.69bil (vs. RM2.76bil as at end-March 2015). SCG has secured RM520mil worth of new jobs so far this year, vs. our assumption of RM1.8bil. SCG targets to achieve new orders totaling RM2bil annually. Backed by parent Sunway, SCG can count on RM500mil-RM800mil worth of jobs annually.

As at end-June 2015, SCG’s outstanding order book accounts for 1.4x FY14’s revenue of RM1.9bil. We project SCG’s FY15F-FY17F PAT at RM117-137mil. We maintain our numbers for now, pending Sunway’s result next week. SCG’s better-than-expected numbers would help mitigate any decline in property sales. Sunway is facing headwinds in its property development division. For 1HFY15, it registered RM500mil worth of property sales.

Pursuant to the listing of SCG, Sunway is set to pay out 25sen-28sen/share in a special dividend, translating into a yield of 7%-8%, apart from an expected regular dividend of 10 sen/share. We expect Sunway to pay out the dividend by the end of next month.

We believe Sunway’s long-term prospects are intact, notwithstanding the current blip in the property market, while its other divisions, including property investments, will cushion the impact of the soft property market. Apart from the anticipated special dividend payout, we maintain BUY, for continued exposure to the southern economic development corridor, specifically in Sunway Iskandar.

Others :

Malakoff : All on track at the interim       Buy

MISC : Disposes stake in VTTI     Buy

Economic Update : Reserves drop to 1.0x short-term external debt

QUICK TAKE

Plantation Sector : Newsflow for week 17 to 21 August  Overweight

NEWS HIGHLIGHTS

IHH Healthcare : All eyes on IHH earnings

Sime Darby : Conglomerate looking at proposals to raise up to RM6 billion

Property Sector : JCorp to develop township project in Kota Tinggi 

DISCLAIMER:

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