SUNWAY (5211) : Sunway Bhd - Steady margin growth
Target RM3.90 (Stock Rating: ADD)
Sunway's annualised 9M14 core net profit was 3% above our full-year forecast and 6% above consensus. We consider the results to be broadly in line as tax rates should normalise to a higher level in 4Q. Operationally, segmental performance shows steady growth in construction margins while property development benefited from a higher-margin sales mix despite weaker billings. We continue to expect strong order book growth in the medium term, with Sunway potentially winning a sizeable building project. We maintain our EPS forecasts, but our target price (still based on a 20% RNAV discount) increases as we roll it over to end-2015. Positive news on contract wins and potential special dividends from the listing of SunCon support our Add call.
Key divisions showing growth
Though 9M14 core net profit was 3% above our full-year forecast and 6% above consensus, we consider the results to be broadly in line as tax rates should trend higher, due to the one-off reversal of deferred tax in 3Q. Operationally, Sunway reported considerably strong segmental numbers, driven by the 12-34% yoy increase in property development and construction pretax profit in 9M14. We expect its EBIT margin to continue rising to c.14% for the full year due to an improving sales mix with more higher-margin properties and stronger construction margins. Its 9M14 core net profit grew by a strong 22% yoy. The absence of dividends was expected.
Potential rise in order book
While YTD total job wins only stood at RM881m, we continue to be optimistic about Sunway's chances of securing a sizeable domestic building project by end-2015. The group is targeting a RM1bn-2bn contract which, if successful, would raise its outstanding order book of RM3.3bn by at least 30%. We keep our RM1.5bn new orders assumption for FY15-16, supported by the roll-out of MRT 2. The group was one of the winners of the above-ground work for MRT 1.
Special dividends from listing of SunCon
The prospect of a special dividend that potentially ranges between 20 and 30 sen/share, in our estimation, remains intact as the listing of Sunway Construction is still on the cards. We expect this to materialise in FY15 given the IPO timing of 1H15. Sunway also offers a potential dividend yield of 6-9%, excluding normal dividends.
Source: CIMB Daybreak - 19 November 2014
Target RM3.90 (Stock Rating: ADD)
Sunway's annualised 9M14 core net profit was 3% above our full-year forecast and 6% above consensus. We consider the results to be broadly in line as tax rates should normalise to a higher level in 4Q. Operationally, segmental performance shows steady growth in construction margins while property development benefited from a higher-margin sales mix despite weaker billings. We continue to expect strong order book growth in the medium term, with Sunway potentially winning a sizeable building project. We maintain our EPS forecasts, but our target price (still based on a 20% RNAV discount) increases as we roll it over to end-2015. Positive news on contract wins and potential special dividends from the listing of SunCon support our Add call.
Key divisions showing growth
Though 9M14 core net profit was 3% above our full-year forecast and 6% above consensus, we consider the results to be broadly in line as tax rates should trend higher, due to the one-off reversal of deferred tax in 3Q. Operationally, Sunway reported considerably strong segmental numbers, driven by the 12-34% yoy increase in property development and construction pretax profit in 9M14. We expect its EBIT margin to continue rising to c.14% for the full year due to an improving sales mix with more higher-margin properties and stronger construction margins. Its 9M14 core net profit grew by a strong 22% yoy. The absence of dividends was expected.
Potential rise in order book
While YTD total job wins only stood at RM881m, we continue to be optimistic about Sunway's chances of securing a sizeable domestic building project by end-2015. The group is targeting a RM1bn-2bn contract which, if successful, would raise its outstanding order book of RM3.3bn by at least 30%. We keep our RM1.5bn new orders assumption for FY15-16, supported by the roll-out of MRT 2. The group was one of the winners of the above-ground work for MRT 1.
Special dividends from listing of SunCon
The prospect of a special dividend that potentially ranges between 20 and 30 sen/share, in our estimation, remains intact as the listing of Sunway Construction is still on the cards. We expect this to materialise in FY15 given the IPO timing of 1H15. Sunway also offers a potential dividend yield of 6-9%, excluding normal dividends.
Source: CIMB Daybreak - 19 November 2014
