KUALA LUMPUR: Sunway Bhd’s long-term growth remains strong on the expectation that the full movement control order (FMCO) will have a lesser impact this year than last year.
RHB Research said if the lockdown is extended, the earnings impact would be more severe for the company in the third quarter (Q3) of 2021.
The firm said Sunway’s fourth quarter (Q4) 2021 should see much stronger pent-up demand as the country’s vaccination rate should have reached 60-65 per cent by then.
Moving on, RHB Research said Sunway’s long-term growth plans are unchanged despite the Covid-19 pandemic.
Sunway has raised its sales target to RM2.2 billion after hitting RM1.6 billion in property sales in the first half of 2021 (1H21).
Despite the pandemic, Sunway’s management still aims to launch other projects in the pipeline, including Sunway Artessa with a combined gross domestic value (GDV) of RM710, the bank-backed research firm noted.
The firm also said Sunway is confident that Singapore’s sovereign wealth fund GIC Pte Ltd will not exercise the put option for Sunway Healthcare.
It said that Sunway is confident that it will achieve the minimum initial public offering (IPO) valuation for Sunway Healthcare.
“In fact, given the healthcare company’s growth prospects and expansion plan, management aims to reach a valuation of RM8-10 billion upon its listing in six to eight years.
“Meanwhile, the staggered payment from GIC of RM750 million would also mean a lower average cost of capital, as the commitment to fulfil the 12.5 per cent internal rate of return (IRR) will then be ‘delayed’.
“Sunway will be able to leverage on the current low-interest rates and the scheduled cash flow from GIC to undertake more borrowings now if needed,” it said.
Meanwhile, the research house said Sunway’s application for a digital bank license and acquiring a majority stake in Multicare Health Pharmacy is part of the company’s long-term growth strategy.
Sunway has a wide database on the number of visitors clocked in its shopping malls, hotels, theme parks, hospitals, workers in its offices, as well as students in its educational institutions to support its digital bank license.
“We maintained ‘Buy’ on Sunway with a new target price (TP) of RM2.02 from RM2.09, with an 18 per cent upside.
“Its new TP reflects our revisions to earnings estimates and the valuation for Sunway Healthcare,” it added.
Source: New Straits Times
