SUNWAY: Diversified Strengths Underpin Robust Performance, Target Price Lifted

Sunway’s core net profit for the first half of 2025 (IH25) reached RM437.0 million, aligning broadly with both TA Securities’ and consensus’ full-year forecasts at 42% and 41% respectively. The investment bank anticipates a stronger second half, bolstered by consistent recurring income from investment properties and robust contributions from its construction division. The company also declared a first interim dividend of 4 sen per share, doubling the amount paid in the previous financial year.

Performance Review

Year-on-year, IH25 core Pre-Tax Profit (PBT) surged 43% to RM673.6 million. This growth was primarily driven by strong performances across most segments, with the notable exception of property development and healthcare. The construction segment was a key driver, seeing PBT soar 163% year-on-year to RM163 million, propelled by accelerated progress on data centre projects. Property investment PBT also rose 31% year-on-year, supported by higher income from investment properties and stronger contributions from Sunway REIT.

Conversely, property development PBT contracted 22% due to slower billings, while healthcare PBT decreased 46% year-on-year, attributed to startup and pre-opening costs at SMC Damansara and SMC Ipoh, despite underlying operations showing improvement. Quarter-on-quarter, both revenue and core PBT increased by 8% and 13% respectively in 2Q25, primarily due to stronger contributions from most business segments, excluding property investment. Healthcare also improved sequentially, driven by higher patient footfall and stronger operational results which offset the initial startup losses from new hospitals.

Sunway’s 2Q25 property sales decreased 3% year-on-year but saw a 34% quarter-on-quarter increase to RM744 million, bringing the year-to-date IH25 property sales to RM1.3 billion, a marginal 2% year-on-year increase, with Klang Valley projects accounting for 45% of total sales.

Future Outlook and Strategic Initiatives

The group’s future remains positive, with property sales currently standing at approximately RM2.3 billion, representing about 64% of its 2025 sales target of RM3.6 billion. Recent project launches, such as Otto Place in Singapore, have seen strong take-up rates (91%), underscoring resilient demand. Upcoming projects like Sunway LakeHills and Sunway Majestic, along with strategic land acquisitions in Seremban and Kuang, are expected to further strengthen its transit-oriented development and industrial portfolio.

Earnings visibility is robust for the next 2-3 years, supported by unbilled sales of RM3.7 billion and an outstanding construction order book of RM4.2 billion (external jobs only). The construction segment is well-positioned to capitalize on Malaysia’s digital infrastructure push, having delivered over 100MW of data centre capacity. Its subsidiary, SunCon, is on track to achieve an order book replenishment target of RM4.5-6.0 billion for FY25, bolstered by RM1.6 billion in new wins during 2Q25. Furthermore, healthcare is pursuing a steady expansion, with licensed bed capacity increasing to 1,662 following the opening of SMC Ipoh. Strong demand for quality healthcare and medical tourism at both Ipoh and Damansara hospitals is expected to drive long-term growth.

Investment Recommendation

TA Securities has revised its target price to RM5.76 per share (previously RM5.68), reflecting updated valuations for SunCon (from RM5.76 to RM6.31) and Sunway REIT (from RM2.19 to RM2.28). The investment bank maintains its BUY recommendation on the stock, which last traded at RM4.97, implying a potential upside of 16.0% to the new target price.