Stock Name: SUNWAY
Company Name: SUNWAY HOLDINGS BHD
Research House: OSK
Sunway Holdings Bhd
(June 29, RM1.50)
Maintain buy at RM1.55 with a target price of RM2.22: It was announced yesterday on Bursa Malaysia that Sunway had won a RM129 million job to construct a dairy products factory in Pulau Indah, Port Klang, Selangor. The job was awarded by PLM Dairies SB and is expected to be completed over the next 12 months. Imputed in our projections is a RM1 billion per year order book replenishment for FY10 to FY12. Including this recent win, Sunway has bagged six jobs YTD, collectively valued at RM602 million or 60% of its FY10 new jobs target.
SunCity has another RM1 billion to RM1.5 billion worth of contracts to be tendered out over the next one to two years, including the Pyramid mall extension, Sunway office tower (Sunway is currently doing the ground works), Monash University extension, student apartments and Sunway Medical Centre extension. There are also plans to construct a new office tower beside the former Wisma Denmark in KL. The launch of Sunway REIT (NR) will also free up some cash for SunCity to embark on more development projects which could eventually benefit Sunway.
On the domestic front, Sunway has RM10 billion in target tenders (a 50:50 mix between private and government jobs). Some of these jobs are the Penang and Ipoh airport upgrades (RM300 million), Kelau Dam (RM200 million to RM250 million), Kuantan treatment plant and some jobs in Putrajaya. We understand that Sunway has submitted the lowest bid for the LCCT building (RM750 million to RM850 million) on a design-and-build basis. We understand that there are only three to four contractors remaining.
Sunway has submitted RM1.3 billion worth of bids for road works in India and will be tendering for more when they open up (likely very soon). In the Middle East, work on Phase 1 of Arzanah is on track and is now more than 30% complete. Tenders for Phase 2 should be out early next year. We expect Sunway to have a decent chance of winning given its preferred contractor status with the developer. In Singapore, management expects more contracts for the supply of its precast concrete structures. Its plant is currently 70% to 80% utilised and should be able to accommodate higher demand.
Our recent meeting with management has reinforced our optimism on Sunway. Yesterday's RM129 million job win further supports our view that contract flows will be strong. As YTD job wins are still within our RM1 billion order book replenishment target, we make no changes to our estimates. Our RM2.22 target price is based on 12 times partially diluted FY10 EPS. We have a three-year CAGR of 31.7%. Management has guided that it may introduce a dividend policy with a 20% to 25% payout versus our current assumption of 10%. Foreign shareholding now stands at 8% versus the 17% to 18% peak in 2007. Along with Mudajaya (Buy, TP: RM7.33), Sunway remains one of our top sector picks. ' OSK Research Sdn Bhd
This article appeared in The Edge Financial Daily, June 30, 2010.
Company Name: SUNWAY HOLDINGS BHD
Research House: OSK
Sunway Holdings Bhd
(June 29, RM1.50)
Maintain buy at RM1.55 with a target price of RM2.22: It was announced yesterday on Bursa Malaysia that Sunway had won a RM129 million job to construct a dairy products factory in Pulau Indah, Port Klang, Selangor. The job was awarded by PLM Dairies SB and is expected to be completed over the next 12 months. Imputed in our projections is a RM1 billion per year order book replenishment for FY10 to FY12. Including this recent win, Sunway has bagged six jobs YTD, collectively valued at RM602 million or 60% of its FY10 new jobs target.
SunCity has another RM1 billion to RM1.5 billion worth of contracts to be tendered out over the next one to two years, including the Pyramid mall extension, Sunway office tower (Sunway is currently doing the ground works), Monash University extension, student apartments and Sunway Medical Centre extension. There are also plans to construct a new office tower beside the former Wisma Denmark in KL. The launch of Sunway REIT (NR) will also free up some cash for SunCity to embark on more development projects which could eventually benefit Sunway.
On the domestic front, Sunway has RM10 billion in target tenders (a 50:50 mix between private and government jobs). Some of these jobs are the Penang and Ipoh airport upgrades (RM300 million), Kelau Dam (RM200 million to RM250 million), Kuantan treatment plant and some jobs in Putrajaya. We understand that Sunway has submitted the lowest bid for the LCCT building (RM750 million to RM850 million) on a design-and-build basis. We understand that there are only three to four contractors remaining.
Sunway has submitted RM1.3 billion worth of bids for road works in India and will be tendering for more when they open up (likely very soon). In the Middle East, work on Phase 1 of Arzanah is on track and is now more than 30% complete. Tenders for Phase 2 should be out early next year. We expect Sunway to have a decent chance of winning given its preferred contractor status with the developer. In Singapore, management expects more contracts for the supply of its precast concrete structures. Its plant is currently 70% to 80% utilised and should be able to accommodate higher demand.
Our recent meeting with management has reinforced our optimism on Sunway. Yesterday's RM129 million job win further supports our view that contract flows will be strong. As YTD job wins are still within our RM1 billion order book replenishment target, we make no changes to our estimates. Our RM2.22 target price is based on 12 times partially diluted FY10 EPS. We have a three-year CAGR of 31.7%. Management has guided that it may introduce a dividend policy with a 20% to 25% payout versus our current assumption of 10%. Foreign shareholding now stands at 8% versus the 17% to 18% peak in 2007. Along with Mudajaya (Buy, TP: RM7.33), Sunway remains one of our top sector picks. ' OSK Research Sdn Bhd
This article appeared in The Edge Financial Daily, June 30, 2010.
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