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Sunway Berhad Receives "Neutral" Rating from MIDF With Target Price of RM4.24

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Bursa Analysis Picks wrote a column · Nov 17 18:21
MIDF Research has released a comprehensive report on Sunway Berhad $SUNWAY (5211.MY)$ , covering its financial performance, recent project wins, and strategic initiatives. The report maintains a "Neutral" rating for Gamuda, setting a target price of RM4.24.
Company Introduction:
Sunway Berhad $SUNWAY (5211.MY)$ , a company listed on the Main Board of Bursa Malaysia, is a Malaysian property-construction corporation. The company has announced a significant land acquisition in Taman Taynton, Kuala Lumpur, which is expected to bolster its property development presence in Cheras. This acquisition is seen as a strategic move to expand its footprint in the region, with the land being adjacent to its existing Sunway Alishan residential development.
Financial Performance Overview and Forecast:
Revenue and Operating Profit: The report forecasts a slight decrease in revenue from RM6,922 million in 2024E to RM6,846 million in 2026F. Similarly, operating profit is expected to decrease from RM832 million in 2024E to RM819 million in 2026F.
Profit before tax and core PATAMI: Profit before tax is expected to decrease from RM859 million in 2024E to RM808 million in 2026F. Core PATAMI (Profit After Tax and Minority Interest) is also expected to increase slightly from RM809 million in 2024E to RM845 million in 2026F.
Earnings Per Share (EPS): Core EPS is expected to increase from 12.58 sen in 2024E to 13.14 sen in 2026F.
Dividend Yield: Dividend yield is expected to remain relatively stable at 1.6% to 1.7% over the forecast period.
Revenue and Trading Highlights:
Land Acquisition: Sunway Berhad's wholly-owned subsidiary, Sunway Melawati Sdn Bhd, has acquired 17.58 acres of freehold land in Taman Taynton for RM320 million, with an indicative Gross Development Value (GDV) of at least RM3.2 billion.
Development Plan: The land is earmarked for a mixed-use development, including serviced apartments and retail outlets, with an estimated development period of 11 years and a target launch in early FY27.
Share Price Performance: The share price has shown significant growth over the past 12 months, with a 109.6% increase.
Investment Recommendation:
Rating: The report maintains a NEUTRAL rating for Sunway Berhad with a revised Target Price of RM4.24, up from the previous RM4.15. This revision incorporates the RNAV contribution from the land acquisition and an updated valuation of Sunway REIT.
Funding and Gearing: Sunway Berhad plans to fund the acquisition through internally generated funds and borrowings, which is expected to marginally increase its net gearing from 0.49x to 0.51x.
Risks and Opportunities:
Risks: The report does not explicitly mention risks but implies that the current share price may already reflect the positive outlook, suggesting limited upside potential in the short term.
Opportunities: The improving prospects for Iskandar Malaysia and the upcoming listing of the healthcare division are seen as opportunities that could unlock value for the company.
Conclusion:
While Sunway Berhad's land acquisition in Taman Taynton is viewed positively for expanding its property presence in Cheras, the report maintains a NEUTRAL stance due to the belief that the current share price has largely priced in these positives. The company's financial forecasts show a stable to slightly decreasing trend in revenue and operating profit, with a modest increase in core PATAMI and a stable dividend yield. The investment community should consider the company's strategic moves and financial performance, along with the overall market conditions, when evaluating Sunway Berhad as an investment.
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