Stock Name: SUNRISE
Company Name: SUNRISE BHD
Research House: INTER PACIFIC
Sunrise Bhd
(May 14, RM2.07)
Outperform at RM2.08 with target price of RM2.92: We recommend outperform with our target price at RM2.92, ascribing forward PER (price-earnings ratio) of eight times and EPS (earnings per share) of 36.5 sen.
Sunrise had continued to pare down its gearing from 46% beginning FY10 to 33% in 3QFY10, indicating the management's seriousness in bringing down its gearing level to zero. Unbilled sales currently stand at RM907 million excluding sales pending sale and purchase agreement finalisation of RM164 million which would underpin earnings for next two financial years. Further catalysts to its growth would be the new launches ' Canada's Richmond and Solaris Tower KL, expected to be launched by 2H10.
Year-to-date (YTD) top line accounted for only 56.1% of our full-year forecast and 55.4% of consensus estimation. The 18.7% fall in Sunrise's revenue was due to the completion of Meridin, MK10 and part of Solaris Dutamas. The drop is seen as inevitable in our view considering delays to new launches in CY09 following the global and domestic recession, which saw poor take-up rate for high-end property market in the Klang Valley. Hence, we have revised downwards our FY10 revenue forecast by 15% and net profit forecast by 14%.
Despite net profit receding by 15.7% year-on-year, net profit margin improved by 3.7%. Excluding exceptional gains of RM19.4 million YTDFY09, net profit margin in FY09 would have been 16.5%, which is 4% lower than YTDFY10 net margin. The improvement in net margin was due to better contribution from the higher margin products ' Residences and MK11.
As part of its strategy to branch out to different product segments and multiple locations, Sunrise has lined up two launches in KL and Canada. Solaris Tower, located off Jalan Sultan Ismail, is being tentatively scheduled for launching in 2HCY10. The development consists of two towers offering 570,000 sq ft of office space and 20,000 sq ft of retail space. We believe the strata development will attract the attention of buyers looking for smaller office space in the CBD (central business district) area as opposed to purpose-built offices which are intended for en bloc sales and corporation leasing. Canada's Richmond project is tentatively scheduled for launching in 3Q-4QCY10. The RM1.11 billion integrated development will be launched in two phases over three years apart under the build-and-sell concept.
Solaris Dutamas' retail space is set to open in 1QCY11, with pre-leasing in 2010. The retail mall's NLA is 335,000 sq ft with 5,000 car parks. Other investment assets include the Solaris Dutamas district cooling system, 53,902 sq ft of retail space in Solaris Plaza Mont'Kiara and Solaris Mont'Kiara as well as 1,776 car parks bays at Solaris Mont'Kiara. According to the management, they had no intention of setting up a real estate investment trust (REIT) as reported earlier. Judging from the size of investment assets of some 400,000 sq ft, setting up a REIT is not viable. ' Inter-Pacific Research, May 14
This article appeared in The Edge Financial Daily, May 17, 2010.
Company Name: SUNRISE BHD
Research House: INTER PACIFIC
Sunrise Bhd
(May 14, RM2.07)
Outperform at RM2.08 with target price of RM2.92: We recommend outperform with our target price at RM2.92, ascribing forward PER (price-earnings ratio) of eight times and EPS (earnings per share) of 36.5 sen.
Sunrise had continued to pare down its gearing from 46% beginning FY10 to 33% in 3QFY10, indicating the management's seriousness in bringing down its gearing level to zero. Unbilled sales currently stand at RM907 million excluding sales pending sale and purchase agreement finalisation of RM164 million which would underpin earnings for next two financial years. Further catalysts to its growth would be the new launches ' Canada's Richmond and Solaris Tower KL, expected to be launched by 2H10.
Year-to-date (YTD) top line accounted for only 56.1% of our full-year forecast and 55.4% of consensus estimation. The 18.7% fall in Sunrise's revenue was due to the completion of Meridin, MK10 and part of Solaris Dutamas. The drop is seen as inevitable in our view considering delays to new launches in CY09 following the global and domestic recession, which saw poor take-up rate for high-end property market in the Klang Valley. Hence, we have revised downwards our FY10 revenue forecast by 15% and net profit forecast by 14%.
Despite net profit receding by 15.7% year-on-year, net profit margin improved by 3.7%. Excluding exceptional gains of RM19.4 million YTDFY09, net profit margin in FY09 would have been 16.5%, which is 4% lower than YTDFY10 net margin. The improvement in net margin was due to better contribution from the higher margin products ' Residences and MK11.
As part of its strategy to branch out to different product segments and multiple locations, Sunrise has lined up two launches in KL and Canada. Solaris Tower, located off Jalan Sultan Ismail, is being tentatively scheduled for launching in 2HCY10. The development consists of two towers offering 570,000 sq ft of office space and 20,000 sq ft of retail space. We believe the strata development will attract the attention of buyers looking for smaller office space in the CBD (central business district) area as opposed to purpose-built offices which are intended for en bloc sales and corporation leasing. Canada's Richmond project is tentatively scheduled for launching in 3Q-4QCY10. The RM1.11 billion integrated development will be launched in two phases over three years apart under the build-and-sell concept.
Solaris Dutamas' retail space is set to open in 1QCY11, with pre-leasing in 2010. The retail mall's NLA is 335,000 sq ft with 5,000 car parks. Other investment assets include the Solaris Dutamas district cooling system, 53,902 sq ft of retail space in Solaris Plaza Mont'Kiara and Solaris Mont'Kiara as well as 1,776 car parks bays at Solaris Mont'Kiara. According to the management, they had no intention of setting up a real estate investment trust (REIT) as reported earlier. Judging from the size of investment assets of some 400,000 sq ft, setting up a REIT is not viable. ' Inter-Pacific Research, May 14
This article appeared in The Edge Financial Daily, May 17, 2010.
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