business

Solid fundamentals, diversified ops to help Sunway ride through headwinds

KUALA LUMPUR: Given the market headwinds, RHB Research believes Sunway Group Bhd's solid fundamentals and diversified business model should help it to ride through this challenging period.

The firm said better earnings recovery in Sunway's three core divisions this year was likely to offset the weakness in smaller business divisions.

"The progressive opening of new investment properties will likely boost the performance of the property investment and healthcare divisions," RHB Research said in a report today.

RHB Research said downside risk to the company's RM2.2 billion sales target was possible.

While the company already achieved RM447 million new sales in the first quarter (Q1) 2022, demand for property may turn weaker given the expectation of an interest rate hike.

"Sunway Gardens in Tianjin China is now held back due to weak market sentiment and slower economic growth as a result of China's zero-Covid policy. Flynn Park in Singapore may be launched only in late 2022, or early 2023," RHB Research said.

In addition, RHB Research said the construction of new hospitals had seen some cost increase due to rising building material prices and the purchase of new medical equipment, which was getting more expensive due to the weaker ringgit.

However, it said the management guided that as Sunway Construction was the contractor undertaking all the construction works, the cost increase should still be under control given better cost management and timing of bulk procurement.

RHB Research maintained its "Buy" call on Sunway with a target price of RM2.06.

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