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4QFY10 : An eventful and fruitful year
• Within expectations
FY10 results came in within our expectations but missed consensus estimates. After adjusting for exceptional items relating to Sunway REIT listing (e.g. fair value gains, disposal gains, deferred tax etc), FY10 adjusted net profit achieved 99% and 79% of house and consensus estimates respectively. No final dividends were proposed. Full year net dividends amount to 23.3 sen which fell short of our 30 sen DPS expectation.
• Quite an eventful year
FY10 adjusted net profit of RM162.1m was 18.8% higher than corresponding period last year. Property sales momentum remains intact as 4Q10 sales reached RM431m, the highest quarterly sales ever recorded by Sunway City. For FY10, the group achieved property sales of RM1,132m, backed by good take-up for new projects (Sunway SPK 3 Harmoni, Sunway Rymba Hills, A’Marine and Sunway Guanghao). Unbilled sales continued its uptrend and have reached RM1,102m, the highest in 2 ½ years.
Besides strong financial performance, FY10 has been an eventful year for Sunway City. It has listed Sunway REIT, launched its maiden Chinese project, acquired new landbanks with GDV of RM1.8bn, and announced a merger with Sunway Holdings.
• Listing of REIT proved to be earnings accretive
Detractors of Sunway REIT listing has been proven wrong as management revealed that incremental earnings has more than offset the effect of dilution of its interest in the 8 assets injected into the REIT. For 2HFY10, the net earnings accretion amount to RM2.8m.
• Target RM1.5bn sales in FY11
Management is now guiding sales target of RM1.5bn for FY11, which is inline with our expectations. Launches will be stepped up from RM1.73bn in FY10 to RM2.8bn in FY11. Some of the mega launches include Sunway Velocity (1Q11) and La Costa @ Sunway South Quay (1Q11), both of which have received very encouraging registrations.
• Reiterate BUY
We continue to rate Sunway City a BUY as fundamental remains intact and valuation undemanding. Our target price of RM5.10 (based on the
swap price for the merger with Sunway Holdings) is unchanged but will be reviewed for upgrade.
