Sunway expects to sustain performance despite challenges

KUALA LUMPUR (June 17): Sunway Bhd expects to sustain its performance for the current financial year ending Dec 31, 2016 (FY16) despite challenges faced by the property and construction sectors.

“The year is expected to be very challenging and while Sunway is not exempted from the weakness in the macroeconomic environment, I think we can sustain our revenue and performance for FY16,” said group executive chairman Tan Sri Dr Jeffrey Cheah (pictured).

Cheah said economic uncertainties will cause the property sector to continue to consolidate until consumer sentiment and business confidence start to recover, but the government’s commitment to continue to roll out high-impact construction works will give an edge to the group’s construction, quarry and building materials businesses.

Sunway has diversified businesses across multiple industries, including property, construction, hospitality, leisure, trading and manufacturing, quarrying, building materials and healthcare.

The diversification is one of the key advantages for the group in managing the economic challenges ahead, Cheah told reporters after the group’s annual general meeting yesterday.

The group also has an advantage with a steady income stream derived from recurring rentals from its property investment assets, as well as dividend income from its associate, Sunway Real Estate Investment Trust, he said.

For the first quarter ended March 31 (1QFY16), the group’s revenue edged up slightly to RM1.07 billion from RM1.06 billion a year ago. However, net profit fell 30.3% to RM102.1 million from RM146.5 million.

This fall was mainly because the 1QFY15 profit had included RM22.9 million as capital gains from the disposal of two units of investment properties.

In terms of operational performance, Sunway’s property development and property investment segments recorded better financial results, while the other segments generally recorded lower profits.

For 1QFY16, 80.7% of the RM1.07 billion revenue came from the property development segment, property investment division and construction.

Cheah said these three segments will continue to be the main driver of its earnings in FY16.

Sunway’s share price rose 0.33% to RM3.01 yesterday, with 1.09 million shares changing hands. At the current level, the group is trading at a trailing price-earnings ratio of 7.75 times, with a market capitalisation of RM6.04 billion.

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This article first appeared in The Edge Financial Daily, on June 17, 2016. Subscribe to The Edge Financial Daily here.