Stock Name: SUNWAY
Company Name: SUNWAY HOLDINGS BHD
Research House: RHB
Sunway Holdings Bhd
(April 12, RM1.68)
Maintain outperform at RM1.56 with target price of RM1.69: Geneba Dua, a 65:35 joint venture (JV) between Sunway and a private company called Monty Properties, plans to venture into a high-end residential property project comprising terrace and semi-detached houses with a total gross development value (GDV) of RM120 million on land parcels measuring a total of 16.9 acres (6.8ha) in Puncak Jalil, Selangor.
We understand from sources that Monty Properties is the "beneficial owner" of the land, and the land will be sold to the JV company at a later stage. For a start, Sunway and Monty Properties will each pump in equity amounting to RM3.9 million and RM2.1 million respectively to the JV company.
We are positive on Sunway's latest proposed property venture, given the good location in the mature and highly sought-after area, south of Kuala Lumpur. Assuming a profit before tax (PBT) margin of 30%, we estimate that the latest property project will earn Sunway RM23 million PBT.
The latest deal will effectively boost Sunway's outstanding landbank in Malaysia by 4% to 396 acres, underpinning its property profits in Malaysia over the long term. Including Singapore (at associate level), we project Sunway's property profits to make up 23% to 30% of group profits in FY12/2010 to 2011.
We maintain our forecast as we already assumed Sunway to register a property turnover and earnings before interest and tax (Ebit) in Malaysia of about RM50 million and RM15 million per annum respectively in FY12/2010 to 2011, underpinned by recurring sales at its existing property projects as well as contributions from new property ventures.
We are beginning to turn a little more upbeat on the sector, prompted largely by investors' improving risk appetite for construction stocks following the massive underperformance of the sector vis-à-vis the market in 4Q09 and 1Q10, better sector news flow and new expectations leading up to the announcement of the 10th Malaysia Plan (10MP) in June. These may moderate negative elements such as the slow pace of the rollout of public projects, shrinking margins and declining dominance of established players in large-scale projects locally, and the not-so-rosy outlook and increased operating risks in key overseas markets (following the Dubai credit crisis, dong's devaluation and rising arbitration cases).
We maintain our outperform call. The indicative fair value is RM1.69 based on 10 times fully diluted FY12/10 earnings per share (EPS) of 16.9 sen, in line with our benchmark one-year forward target price-earnings ratio (PER) for the construction sector of 10 times to 14 times. - RHB Research Institute, April 12
This article appeared in The Edge Financial Daily, April 13, 2010.
Company Name: SUNWAY HOLDINGS BHD
Research House: RHB
Sunway Holdings Bhd
(April 12, RM1.68)
Maintain outperform at RM1.56 with target price of RM1.69: Geneba Dua, a 65:35 joint venture (JV) between Sunway and a private company called Monty Properties, plans to venture into a high-end residential property project comprising terrace and semi-detached houses with a total gross development value (GDV) of RM120 million on land parcels measuring a total of 16.9 acres (6.8ha) in Puncak Jalil, Selangor.
We understand from sources that Monty Properties is the "beneficial owner" of the land, and the land will be sold to the JV company at a later stage. For a start, Sunway and Monty Properties will each pump in equity amounting to RM3.9 million and RM2.1 million respectively to the JV company.
We are positive on Sunway's latest proposed property venture, given the good location in the mature and highly sought-after area, south of Kuala Lumpur. Assuming a profit before tax (PBT) margin of 30%, we estimate that the latest property project will earn Sunway RM23 million PBT.
The latest deal will effectively boost Sunway's outstanding landbank in Malaysia by 4% to 396 acres, underpinning its property profits in Malaysia over the long term. Including Singapore (at associate level), we project Sunway's property profits to make up 23% to 30% of group profits in FY12/2010 to 2011.
We maintain our forecast as we already assumed Sunway to register a property turnover and earnings before interest and tax (Ebit) in Malaysia of about RM50 million and RM15 million per annum respectively in FY12/2010 to 2011, underpinned by recurring sales at its existing property projects as well as contributions from new property ventures.
We are beginning to turn a little more upbeat on the sector, prompted largely by investors' improving risk appetite for construction stocks following the massive underperformance of the sector vis-à-vis the market in 4Q09 and 1Q10, better sector news flow and new expectations leading up to the announcement of the 10th Malaysia Plan (10MP) in June. These may moderate negative elements such as the slow pace of the rollout of public projects, shrinking margins and declining dominance of established players in large-scale projects locally, and the not-so-rosy outlook and increased operating risks in key overseas markets (following the Dubai credit crisis, dong's devaluation and rising arbitration cases).
We maintain our outperform call. The indicative fair value is RM1.69 based on 10 times fully diluted FY12/10 earnings per share (EPS) of 16.9 sen, in line with our benchmark one-year forward target price-earnings ratio (PER) for the construction sector of 10 times to 14 times. - RHB Research Institute, April 12
This article appeared in The Edge Financial Daily, April 13, 2010.
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