CGSI Research projects strong quarter-on-quarter and year-on-year improvement in Sunway’s net profit for 3Q24.
PETALING JAYA: Sunway Bhd
is anticipated to post commendable third-quarter 2024 (3Q24) earnings, driven by its Singapore condominium project.
CGS International (CGSI) Research projected strong quarter-on-quarter (q-o-q) and year-on-year improvement in Sunway’s net profit for 3Q24, mainly due to the recognition of revenue from its Singapore executive condominium project, Parc Central.
The company’s 3Q24 results are due to be out by the end of November.
The research house highlighted that the RM2.9bil gross development value (GDV) project, in which Sunway holds a RM940mil stake, is expected to contribute a pre-tax profit of RM123mil for the quarter.
“Our financial year 2024 (FY24) forecast earnings per share (EPS) is 17% above Bloomberg consensus and we see earnings upgrades post 3Q24 results release.
“We also expect q-o-q stronger construction earnings for Sunway Construction (Group Bhd) in 3Q24, driven by its data centre contracts, but for 4Q24 to be the strongest quarter of the year, similar to 4Q23 which accounted for 36% of the subsidiary’s FY23 core net profit,” it said.
Property pre-sales are on track to hit Sunway’s RM2.6bil target for FY24 with RM1.3bil achieved in the first half of the year (1H24).
One of the standout sales, according to CGSI Research, was the launch of Sunway Maple Meadow Homes in Pendas, where 50 units were sold within just two hours.
The remaining 106 units are expected to be launched soon.
A key catalyst in the research house’s view is the conversion of Sunway’s Medini land to freehold, which enhances its pricing power.
Once further details of the Johor-Singapore Special Economic Zone are revealed, the brokerage expects more robust development and launches in Sunway City Iskandar Puteri over the next five years, which should contribute to sustained growth.
Additionally, Sunway targets to launch a mixed development in 1H26.
CGSI Research estimates the GDV of the project to be around S$1.1bil, with pre-tax margins in the low teens, assuming an average selling price of S$2,000 per sq ft, a plot ratio of three times and 70% land utilisation.
The brokerage noted that key downside risks for Sunway include a potential slowdown in the economy, which could impact most of its divisions, as well as rising raw material costs.
However, it said key re-rating catalysts include stronger property sales and faster-than-expected initial public offering of its healthcare unit.
For 2Q24 ended June 30, Sunway’s net profit increased to RM270.47mil from RM149.93mil in the previous corresponding period, boosted by strong operating performance across all business segments and a gain from the redemption of an investment.
Revenue grew to RM1.58bil from RM1.47bil a year earlier, attributed to better performance from most segments.
Basic EPS rose to 4.11 sen versus 2.54 sen previously.
For 1H24 ended June 30, net profit jumped to RM442.7mil from RM291.57mil in the previous corresponding period.
Revenue improved to RM3bil from RM2.73bil a year ago.
