Broker: UOB Kay Hian
Date of Report: Friday, 23 May 2025
Sunway Berhad: Upgraded to Buy on Strong Earnings Visibility and Resilient Diversified Growth
Overview: Sunway Berhad Positioned as a Safe Haven Amid Macro Uncertainty
Sunway Berhad, a Malaysian conglomerate with diversified interests across property development, investment, construction, trading, manufacturing, quarry, building materials, leisure, hospitality, and healthcare, has received an upgrade to BUY with a revised target price of RM5.45, representing a potential upside of 12.8%. This upgrade reflects Sunway’s compelling earnings visibility, robust business segments, and prudent management, setting it apart as a safe haven for investors in an uncertain global macro environment.
Stock Snapshot and Key Metrics
- Share Price: RM4.83
- Target Price: RM5.45 (previously RM4.82)
- Market Cap: RM30,068.5 million (US\$7,036.0 million)
- 52-week High/Low: RM5.10 / RM2.72
- Shares Issued: 6,225.4 million
- Major Shareholders: Sungei Way Corp Sdn Bhd (45.5%), Jef-San Enterprise Sdn Bhd (10.2%), EPF (8.6%)
- FY25 NAV/Share: RM2.35
- FY25 Net Debt/Share: RM1.87
- Sector: Industrials
1Q25 Results: In Line With Expectations, Driven by Construction and Investment Segments
- Revenue: RM2,367 million (-17% QoQ, +67% YoY)
- Core Net Profit: RM205.4 million (-18% QoQ, +20.6% YoY)
- PATAMI: RM190.6 million (-43.2% QoQ, +10.6% YoY)
- Net Gearing Ratio: Stable at 0.41x (end-Mar 2025)
- Core net profit excludes an exceptional loss of RM14.9 million, mainly from cash flow hedge reserve and financial guarantee contracts.
Key Segmental Performance (1Q25)
| Segment |
Revenue (RMm) |
PBT (RMm) |
PBT Margin (%) |
| Property Development |
263.3 |
33.4 |
12.7 |
| Construction |
1,238.1 |
114.5 |
9.3 |
| Property Investment |
246.4 |
92.3 |
37.5 |
| Healthcare (PAT, equity accounting) |
– |
11.3 |
– |
Key Financials at a Glance
Sunway Berhad: Financial Highlights
| Year to 31 Dec (RMm) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net turnover |
6,136.2 |
7,882.5 |
8,541.1 |
9,044.4 |
10,104.0 |
| EBITDA |
808.0 |
1,031.4 |
1,327.5 |
1,443.6 |
1,615.4 |
| Operating profit |
666.6 |
887.3 |
1,134.5 |
1,216.6 |
1,351.5 |
| Net profit (adj.) |
750.6 |
1,005.8 |
1,182.3 |
1,253.1 |
1,341.5 |
| EPS (sen) |
12.6 |
15.1 |
17.8 |
18.8 |
20.1 |
| PE (x) |
43.1 |
36.1 |
30.7 |
29.0 |
27.0 |
| Dividend yield (%) |
1.0 |
1.1 |
1.3 |
1.4 |
1.5 |
| ROE (%) |
7.0 |
9.0 |
10.2 |
10.5 |
10.9 |
Resilient Property Segment: Strong Unbilled Sales and Johor Focus
- 1Q25 Property Revenue: RM263 million (-9% YoY)
- PBT: RM33 million (-14% YoY), due to high progress billings in 1Q24.
- 1Q25 Property Sales: RM555 million (+11% YoY), representing 15% of the RM3.6 billion full-year target.
- Launched two projects worth RM358 million (9% of sales target) in 4M25, with >20% take-up within a month.
- Unbilled Sales: RM4.1 billion (+23% QoQ), underpinning resilience and earnings visibility.
- Johor Region: 2025 launches GDV of RM1.2 billion (30% of target), with landbank near Bukit Chagar RTS Station and Seremban KTM Railway Station providing visibility into 2028 earnings.
Property Sales by Geography (1Q25):
- Klang Valley: 51%
- Singapore: 36%
- Johor: 10%
- Northern region: 2%
- China: 1%
Quarterly Property Sales Trend (RM million):
- 1Q23: 505.0
- 2Q23: 995.0
- 3Q23: 590.0
- 4Q23: 350.0
- 1Q24: 497.6
- 2Q24: 802.4
- 3Q24: 550.0
- 4Q24: 1,160.0
- 1Q25: 554.7
Healthcare Segment: Capacity Growth and Expansion Plans
- Bed Capacity: +28% YoY
- Inpatient Admissions: +20% YoY
- 1Q25 Net Profit Contribution: RM11 million (-69% YoY), affected by the gestation of two new hospitals. Excluding these, segment PAT would have grown 19% YoY.
- Current Hospitals: Five, including tertiary hospitals at Velocity, Penang, Damansara, and Ipoh.
- Expansion Goal: Eight hospitals by 2030, capitalizing on demographic trends and medical tourism.
Construction Segment: Data Centre Projects Drive Orderbook and Earnings
- 1Q25 PBT: RM115 million (+170% YoY), led by progress in data centre projects.
- Orderbook: RM6.6 billion; data centres comprise 42% of the total.
- Strong orderbook replenishment supports 2025 earnings outlook.
Environmental, Social, and Governance (ESG) Updates
- Environmental: Photovoltaic solar panels installed at most properties.
- Social: Launch of Sunway Cancer Support Fund.
- Governance: High transparency and implementation of anti-bribery and anti-corruption measures.
Segment Profit Contribution (1Q25)
- Construction: 38%
- Property Investment: 30%
- Property Development: 11%
- Trading & Manufacturing: 10%
- Quarry: 5%
- Healthcare: 4%
- Building Materials & Others: 2%
Valuation and Recommendation: Justified Premium for Robust Earnings Visibility
- Target Price Raised: RM5.45 (from RM4.82)
- Valuation Method: Sum-of-the-parts (SOTP), incorporating updated investment property and construction valuations, and healthcare EV/EBITDA multiple raised from 20x to 25x.
- Implied 2025F-27F PE: 27-31x (+1.5SD above five-year mean)
- Implied 2024-26F P/B: 2.1-2.3x (+3SD above five-year mean)
- Above-mean multiples are justified by Sunway’s strong earnings visibility, diversified portfolio, and defensive qualities amid global uncertainty.
Key Financial Metrics & Growth Outlook
Sunway Berhad: Key Metrics (2024-2027F)
| Metric |
2024 |
2025F |
2026F |
2027F |
| EBITDA margin (%) |
13.1 |
15.5 |
16.0 |
16.0 |
| Pre-tax margin (%) |
19.3 |
18.3 |
18.1 |
17.3 |
| Net margin (%) |
12.8 |
13.8 |
13.9 |
13.3 |
| ROA (%) |
4.0 |
4.7 |
4.9 |
5.1 |
| ROE (%) |
9.0 |
10.2 |
10.5 |
10.9 |
| Turnover growth (%) |
28.5 |
8.4 |
5.9 |
11.7 |
| Net profit (adj.) growth (%) |
34.0 |
17.5 |
6.0 |
7.1 |
| Debt to equity (%) |
72.6 |
69.3 |
66.1 |
63.0 |
| Net debt/(cash) to equity (%) |
43.5 |
50.4 |
50.6 |
51.6 |
Conclusion: Sunway Berhad’s Strategic Positioning Warrants Premium Valuation
Sunway Berhad’s diversified business model, resilient property and construction segments, expanding healthcare footprint, and strong financials provide robust earnings visibility and downside protection for investors. The group’s proactive landbanking, data centre-driven construction pipeline, and commitment to ESG initiatives further reinforce its reputation as a defensive investment choice in volatile markets. With a clear growth trajectory and prudent management, Sunway stands out as a premium pick among Malaysian conglomerates, justified by its upgraded BUY recommendation and higher target price of RM5.45.
