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Sunway: Breaking New Horizons Or Facing Cloudy Days Ahead? (Part 1)
By: Brian Brinker
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By: Ong Qiuying
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As Sunway is a multi-sector conglomerate with major stake holdings in property development, it is important to consider the trajectory of the Malaysian economy.

On one hand, if the Malaysian economy contracts, companies such as Sunway could be especially vulnerable, but on the other hand, if the economy expands, the company could benefit substantially.

For now, Malaysia’s economy is expected to grow at about five percent in 2014, even in spite of a rather uncertain global environment.

This follows a 4.7 percent growth in 2013, which marked a bit of a cool off from the 5.6 percent growth the country saw in 2012.

Many of Sunway’s properties are in the retail sector, hence, growth in the aforementioned sector is an important consideration.

In the first quarter of 2014, Malaysia’s retail sector grew by 4.8 percent, but this growth slowed from the 7.5 percent growth seen one year earlier.

One issue of concern that could detrimentally impact Malaysia is increasing household debt, which is now the highest in Asia. Right now, household debt in Malaysia is at 86.8 percent of the gross domestic product.

This high debt could cause consumers to cut back on spending and to forgo luxuries, such as trips to Sunway’s theme parks.

There is also a risk that Malaysia could be developing a property bubble. High debt often points to a housing bubble as dramatic increases in price forces people to take out bigger mortgages.

This can cause prices to inflate and eventually a bubble can form. Nonetheless, the expansion of lending can also be a signal of a growing economy with ample liquidity in the banking system.

It should be noted that there currently appears to be an oversupply of real estate in Malaysia. A recent flurry of construction has brought thousands of new units into the market, creating a supply surplus.

However, experts believe that this oversupply situation is only short-term and that demand will catch up. So long as the Malaysian economy continues to grow, the risk of a property bubble bursting will be minimised.

Retail spending should also remain strong. If the Malaysian economy takes a turn for the worst, however, Sunway will certainly feel the fallout.

Company Profile
Sunway is a multi-sector construction, property management, and retail group. The company was originally founded in the 19th century as a tin mining group.

The company later converted its land outside Kuala Lumpur into its flagship property, “Bandar Sunway” with the company taking charge of the integrated resort’s development.

Sunway has expanded its presence across Kuala Lumpur and is now expanding across Malaysia. Sunway now has property developments in Johor, Perak, and Penang, among other places.

Beyond property, the company also operates the Sunway Resort theme park in Bandar Sunway. The company owns one of Malaysia’s largest shopping malls, Sunway Pyramid.

Now, let’s take a look at Sunway’s financial highlights and the latest developments that could benefit them.

This article is brought to you by Bursa Malaysia Berhad. The research in this article was conducted independently by Pioneers & Leaders (Publishers) Pte Ltd (“Pioneers & Leaders”) and the views and opinions expressed in this article are Pioneers & Leaders’ own and do not represent the views and opinions of Bursa Malaysia. Bursa Malaysia does not warrant or represent, expressly or impliedly as to the accuracy, completeness and currency of the information in this article. In no event shall Bursa Malaysia be liable to the reader or any other third party for any claim howsoever arising out of or in relation to this article.
This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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