Monday, October 26

Sunway’s diversified portfolio to underpin long term earnings visibility

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According to AllianceDBS Research Sdn Bhd (AllianceDBS Research), as the Covid-19 outbreak has been largely contained in Malaysia, Sunway should benefit from gradual economic recovery, especially its hospitality and leisure businesses.

KUCHING: The Covid-19 pandemic is a temporary blip for Sunway Bhd (Sunway) as the group’s diversified business portfolio will continue to underpin its long-term earnings visibility.

According to AllianceDBS Research Sdn Bhd (AllianceDBS Research), as the Covid-19 outbreak has been largely contained in Malaysia, Sunway should benefit from gradual economic recovery, especially its hospitality and leisure businesses.

“Its diversified business portfolio with a proven track record will continue to underpin its long term earnings visibility, leveraging on its superior integrated ‘build-own-operate’ model,” AllianceDBS Research said.

“While Sunway’s hospitality and leisure businesses will be severely impacted by the Covid-19 pandemic and the nationwide lockdown imposed since March 18, Malaysia is already moving toward a recovery phase.

“The outbreak has been largely contained with low daily new cases.”

As such, the research firm opined that Sunway’s weak 2Q20 results should be temporary before rebounding strongly in the second half of 2020 (2H20), contributed by the lumpy contribution from its overseas property projects in Singapore and China.

For the group’s 54 per cent-owned Sunway Construction Bhd, AllianceDBS Research noted that despite a more subdued operating environment and construction space over the past two years, the construction arm still has a sizeable outstanding order book of RM5.4 billion as of March, providing a three-year earnings visibility.

“Therefore, a short term disruption due to the Covid-19 pandemic is unlikely to affect its earnings beyond 2020.”

Looking beyond Covid-19, AllianceDBS Research is positive that Sunway’s healthcare business will continue to grow from strength to strength given its outstanding track record as one of the best medical centres in Malaysia.

“It is currently embarking on aggressive expansion to add more medical centres to its portfolio and replicate the resounding success of Sunway Medical Centre in Sunway City KL which has received numerous accolades over the years.

“The healthcare division will see an expansion to more than 1,500 beds over the next four years from its existing 636 beds.

The research firm believed a separate listing for the healthcare division is on the horizon when the business matures, with high valuation typically fetched by the healthcare business.

“It contributed RM60 million pre-tax profit in financial year 2018 (FY18) on the back of RM460 million revenue.”