PROPERTY

SUNWAY
(SWB MK EQUITY, SWAY.KL) 2 Feb 2021

Acquires new landbank at Taman Mutiara, Cheras, KL

Company report BUY
Thong Pak Leng (Maintained)
thong-pak-leng@ambankgroup.com
03-2036 2025 Rationale for report: Company update

Price RM1.50 Investment Highlights

Fair Value RM1.93
52-week High/Low RM1.87/RM1.22

Key Changes
 We maintain our BUY recommendation on Sunway Bhd
(Sunway) with an unchanged fair value of RM1.93 per share
Fair value 
EPS  based on SOP valuations (Exhibit 2). We make no changes to
our FY20–22 numbers.
YE to Dec FY19 FY20F FY21F FY21F
 Sunway acquired a 3.34-acre parcel of freehold land from
Revenue (RM mil) 4,780.3 3,944.3 5,458.5 5,809.3 CTM Development Sdn Bhd in the neighbourhood of Taman
Core net profit (RM mil) 691.5 298.0 547.3 631.0 Mutiara, Cheras, Kuala Lumpur for RM42mil. The land comes
FD Core EPS (sen) 14.1 6.1 11.2 12.9 with an approved development order, which will accelerate
FD Core EPS growth (%) 26.2 (56.9) 83.7 15.3 the development’s speed to market.
Consensus Net Profit (RM mil) - 360.8 534.5 579.2
DPS (sen) 7.4 3.1 5.5 6.4  Sunway is planning to build 255 units of townhouses and
PE (x) 10.6 24.7 13.4 11.7
condominiums on the land with an estimated GDV of
EV/EBITDA (x) 14.7 29.4 16.4 15.0
RM225mil. The development is targeted towards the medium
Div yield (%) 4.9 2.0 3.7 4.3
ROE (%) 8.5 3.5 6.2 6.9
segment with an indicative price starting from RM650 psf. The
Net Gearing (%) 53.0% 51.5% 51.0% 51.2% project is scheduled for launching by 1H2022 and targeted for
completion by 2026.
Stock and Financial Data
 The acquisition price of RM42mil (RM288 psf) implies a cost
Shares Outstanding (million) 4,888.93 to GDV ratio of 18.6%, and is within the range of 10%–20% for
Market Cap (RM mil) 7,333.4 mixed residential developments in Klang Valley. While there
Book Value (RM/share) 1.9 are not many identical transactions within the area recently;
P/BV (x) 0.8 the asking price for residential land surrounding the
ROE (%) 4.33
neighbourhood with land area larger than 10,000 sq ft ranges
Net Gearing (%) 46.3%
from RM250 psf to RM600 psf.
Major Shareholders Sungei Way Corp SB 51.4%
EPF 10.0%
 The land is located 400 metres away from EkoCheras Mall
Active Equity SB 3.2% (Exhibit 1) that offers direct connectivity to the Taman Mutiara
Free Float 35.6% MRT station. It is surrounded by amenities within a 5km
Avg Daily Value (RM mil) 5.85 radius including Sunway Velocity, Taman Tasik Permaisuri
Park, Pantai Hospital Cheras, UKM Medical Centre and UCSI
Price performance 3mth 6mth 12mth University with easy access to multiple highways such as the
Cheras Kajang Expressway, the Kuala Lumpur Middle Ring
Absolute (%) 8.7 10.3 (14.2)
Relative (%) Road 2 and the Salak Expressway.
(0.8) 2.1 (17.6)

 We are positive on the acquisition as it will help sustain

2.00 1,900
Sunway’s property earnings over the medium term. Moreover,
1,800 we believe the project will be a strong seller given its
1.80
1,700 strategic location. Nonetheless, we made no changes to our
1.60
FY20–22 earnings forecasts as the project is still in the
1,600
planning stage.
1.40 1,500

1,400
 We believe the outlook for Sunway remains positive premised
1.20 on: (i) its unbilled sales of RM3.1bil; (ii) a robust outstanding
1,300 order book of RM5.3bil; and (iii) strong growth potential in its
1.00 1,200 healthcare business. Maintain BUY.
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SWB MK Equity FBMKLCI Index

Sunway 2 Feb 2021

EXHIBIT 1: LOCATION MAP

Source: Company

EXHIBIT 2: SOP VALUATION

Outstanding GDV NPV @10% Value
DEVELOPMENT PROPERTIES Stake Segment % of SOP
(RMmil) (RMmil) (RMmil)
Selangor/KL Property (40% discount to RNAV) 2,384.9 21.9%
Sunway Damansara 2,235.3 137.6 60.0% Investment properties 1,870.5 17.2%
Sunway South Quay 2,486.7 319.1 100.0% Sunway Construction (54.4% stake @ AmInvestment Valuation) 1,090.2 10.0%
Sunway Monterez 38.0 2.9 60.0% Sunway REIT (40.9% stake @ AmInv estment Valuation) 2,499.9 23.0%
Sunway Semeny ih 728.6 65.4 70.0% H ealthcare (30x FY22 earnings) 2,574.2 23.7%
Sunway Cheras 16.8 2.2 100.0% Quarry & building materials (8x FY22 earnings) 158.5 1.5%
Sunway Duta 120.0 8.1 60.0% Trading & manufacturing (8x FY22 earnings) 295.5 2.7%
Sunway Resort C ity 660.1 74.3 100.0%
Sunway Velocity 1,984.0 189.8 85.0% Total SOP 10,873.6
Sunway Velocity TWO 1,360.0 76.5 50.0% N et cash/(debt) @ Company lev el 737.0
Sunway Tow er KL 1 240.0 27.0 100.0% Proceeds from ICPS & conv ersion 977.8
Sunway Termuning 277.0 24.9 80.0% Fair value 12,588.4
Mont Putra, Rawang 156.0 17.6 100.0%
Kelana Jaya 1,450.0 163.2 100.0% Enlarged share base (mil shares) 6,516.6
Jalan Belfield 1,100.0 123.8 100.0% Fair value per share 1.93
Lot One, Kajang 460.0 51.8 100.0%
USJ 1, Subang Jay a 1,400.0 157.6 100.0%
Subang 2 52.0 4.1 70.0%
Wangsa M aju-1 270.0 16.7 55.0%
Dengkil (Emerald Ty coon) 796.6 89.7 100.0%
Bukit Jalil (Sterling Paradise) 800.0 133.6 100.0%
Wangsa M aju-2 300.0 73.5 55.0%
Taman Mutiara, C heras 225.0 48.2 100.0%
Perak
Sunway City Ipoh 928.4 97.6 96.0%
Penang
Sunway Hills 849.0 87.1 100.0%
Sunway Wellesley, Bukit Mertajam 710.5 72.9 100.0%
Paya Terubong 1,500.0 153.9 100.0%
Sunway Tunas, Balik Pulau 60.0 6.2 100.0%
Sunway Betong, Balik Pulau 110.0 11.3 100.0%
Johor
Bukit Lenang 698.4 35.8 80.0%
Medini 10,616.0 407.9 60.0%
Pendas 18,000.0 691.6 60.0%
Singapore
Brookv ale Park 3,000.0 96.3 30.0%
Canberra Link, Sembawang 1,500.0 56.2 35.0%
Tampines Av e 10 2,400.0 89.9 35.0%
China
Tianjin Eco-C ity 765.3 61.2 60.0%
India
Sunway OPUS Grand India 702.4 36.0 50.0%
Sunway MAK Signature Residence 181.2 11.2 60.0%

Unbilled sales 252.0

Subtotal 3,974.9

Source: AmInvestment Bank Bhd

AmInvestment Bank Bhd 2

Sunway 2 Feb 2021

EXHIBIT 3: FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec) FY18 FY19 FY20F FY21F FY22F

Revenue 5,410.2 4,780.3 3,944.3 5,458.5 5,809.3

EBITDA 737.9 801.1 400.3 724.6 809.4
Depreciation/Amortisation (143.2) (235.1) (194.0) (268.5) (285.7)
Operating income (EBIT) 594.7 565.9 206.3 456.1 523.7
Other income & associates 229.3 261.2 259.3 269.2 281.0
Net interest 12.8 87.8 72.5 117.1 124.6
Exceptional items 97.6 75.8 66.0 66.0 66.0
Pretax profit 836.8 915.0 538.1 842.4 929.3
Taxation (121.4) (78.4) (89.8) (141.9) (139.4)
Minority interests (69.9) (69.3) (84.2) (87.2) (92.8)
Net profit 645.5 767.3 364.0 613.3 697.0
Core net profit 547.9 691.5 298.0 547.3 631.0

Balance Sheet (RMmil, YE 31 Dec) FY18 FY19 FY20F FY21F FY22F

PPE 2,627.7 2,749.0 2,268.3 3,139.1 3,340.8

Intangible assets 331.6 331.6 331.6 331.6 331.6
Other long-term assets 9,071.5 9,163.2 8,913.2 9,113.2 9,113.2
Total non-current assets 12,030.8 12,243.8 11,513.1 12,583.9 12,785.6
Cash & equivalent 5,136.0 5,888.9 4,500.4 4,305.2 4,607.7
Inventories 1,857.9 2,102.1 1,618.8 2,134.0 2,253.4
Trade receivables 1,514.5 1,638.4 1,296.8 1,794.6 1,909.9
Other current assets 1,152.2 1,533.8 1,695.8 1,758.1 1,772.5
Total current assets 9,660.7 11,163.1 9,111.8 9,991.9 10,543.5
Trade payables 1,336.2 1,344.3 1,078.0 1,421.1 1,500.6
Short-term borrowings 6,337.1 8,024.9 6,621.6 6,555.4 6,976.6
Other current liabilities 1,501.5 1,509.0 292.6 1,423.6 1,147.5
Total current liabilities 9,174.8 10,878.2 7,992.2 9,400.0 9,624.7
Long-term borrowings 3,345.6 2,310.8 2,310.8 2,310.8 2,409.9
Other long-term liabilities 275.9 189.9 189.9 189.9 189.9
Total long-term liabilities 3,621.6 2,500.7 2,500.7 2,500.7 2,599.8
Shareholders’ funds 7,964.9 8,392.9 8,607.2 8,950.2 9,333.5
Minority interests 1,019.1 1,781.4 1,671.0 1,871.0 1,917.3
BV/share (RM) 1.62 1.71 1.76 1.83 1.90

Cash Flow (RMmil, YE 31 Dec) FY18 FY19 FY20F FY21F FY22F

Pretax profit 836.8 915.0 538.1 842.4 929.3

Depreciation/Amortisation 143.2 235.1 194.0 268.5 285.7
Net change in working capital (189.9) (1,220.0) (834.7) 527.8 (327.0)
Others 136.2 995.2 (1,273.8) (188.9) 7.2
Cash flow from operations 926.3 925.3 (1,376.5) 1,449.7 895.1
Capital expenditure (464.1) 335.9 480.7 (870.8) (201.7)
Net investments & sale of fixed assets 0.0 0.0 0.0 0.0 0.0
Others (470.6) (1,260.1) 250.0 (200.0) 0.0
Cash flow from investing (934.7) (924.2) 730.7 (1,070.8) (201.7)
Debt raised/(repaid) 1,130.6 667.1 14.8 (129.0) (217.8)
Equity raised/(repaid) 6.9 0.0 0.0 0.0 0.0
Dividends paid (316.5) (242.9) (149.6) (270.3) (313.8)
Others (524.7) 234.0 (66.0) (66.0) (66.0)
Cash flow from financing 296.4 658.3 (200.9) (465.4) (597.6)
Net cash flow 288.0 659.4 (846.6) (86.4) 95.8
Adjustments (17.1) 3.4 0.0 0.0 0.0
Net cash/(debt) b/f 2,236.9 2,507.8 3,170.6 2,324.0 2,237.6
Net cash/(debt) c/f 2,507.8 3,170.6 2,324.0 2,237.6 2,333.4

Key Ratios (YE 31 Dec) FY18 FY19 FY20F FY21F FY22F

Revenue growth (%) 3.3 (11.6) (17.5) 38.4 6.4

EBITDA growth (%) (7.5) 8.6 (50.0) 81.0 11.7
Pretax margin (%) 15.5 19.1 13.6 15.4 16.0
Net profit margin (%) 11.9 16.1 9.2 11.2 12.0
Interest cover (x) nm nm nm nm nm
Effective tax rate (%) 14.5 8.6 16.7 16.8 15.0
Dividend payout (%) 41.1 47.2 41.1 44.1 45.0
Receivable turnover (days) 102.2 125.1 120.0 120.0 120.0
Inventory turnover (days) 123.0 151.2 172.2 125.5 137.8
Payable turnover (days) 96.4 102.3 112.1 83.6 91.8

Source: AmInvestment Bank Bhd estimates

AmInvestment Bank Bhd 3

Sunway 2 Feb 2021

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AmInvestment Bank Bhd 4