10 May 2012
A major boost to orderbook. Sunway’s latest MYR1.17b win for the KVMRT Sg Buloh-Kajang viaduct works will boost its outstanding order book by 41% to MYR4b, and enhance earnings visibility over the
medium term. We maintain our earnings forecasts for now having imputed job win potential to the tune of MYR1.5b for this year. Our RNAV-based TP is unchanged at MYR2.62. Maintain HOLD.
MYR1.17b for Viaduct 4 works. Four new work packages – Viaduct 1, Viaduct 4, Viaduct 7 and Depot 1 (Sg Buloh Depot) (see Table 1) –awarded by MRT Corp yesterday are worth a total MYR3.2b. Sunway is the winner of the Viaduct 4 package (6.6km in length) worth MYR1.17b
and is awaiting for the official award. The scope of works comprises the construction of the viaduct guideway and other associated works from Section 17 to the Semantan portal. This win is not a total surprise to us as Sunway is the largest piling contractor in Malaysia.
Enhances earnings visibility. This job win will raise Sunway’s outstanding orderbook for construction by 41% to MYR4b, from MYR2.8b at end-Dec 2011, providing medium-term earnings visibility
and growth for its construction business. Assuming a net margin of 5-7%, we estimate this new contract will contribute MYR58m-MYR82m in net profit (EPS of MYR0.05-0.06), to be recognised into 2016.
A construction-led year. Sunway has won MYR1.46b in construction jobs YTD (including MYR42.4m in foundation works from Tropicana Golf & Country Resort, MYR250m Sunway Velocity Mall substructure works), nearing our MYR1.5b job win assumption for the full year. However, the positive in the construction business is somewhat offset by slowing demand in its property development business. As at endFeb 2012, Sunway recorded MYR100m in property sales meeting just7% of its effective sales target of MYR1.4b for 2012 and 8% of our MYR1.2b forecast for the full year.
Share price: MYR2.37
Target price: MYR2.62 (unchanged)
By OSK Research Report
10 May 2012
MRT Job Well Expected
THE BUZZ
Yesterday Sunway informed Bursa Malaysia that Mass Rapid Transit Corp SB (MRT
Corp) announced in a press statement on 9 May 2012 that Sunway Construction SB, a
subsidiary of Sunway, has won the bid for the Sg Buloh-Kajang (SBK) MRT Line,
Package V4. This involves the construction and completion of the viaduct guideway and
other associated works from Section 17, Petaling Jaya to the Semantan Portal, for a
contract sum of RM1.17bn. It said it will announce on Bursa Malaysia upon receipt and
acceptance of the letter of award from MRT Corp.
OUR TAKE
No surprise. The emergence of Sunway as one of the winning bidders for the MRT
packages came as no surprise as we had anticipated that Sunway should be able to win
some of the MRT packages in view of its strong capability and track record. We gather
that Package V4 stretches 6.6km, which is positive as the job will enable Sunway to
replenish and boost its construction orderbook to RM4bn, which is the highest ever for
the group. The RM1.17bn contract will account for about 78% of Sunway’s annual
construction orderbook replenishment target of RM1.5bn.
Maintain Buy. We maintain our forecast at this juncture pending further details on the
contract upon the receipt and acceptance of the letter of award from MRT Corp. We
maintain our Buy recommendation on Sunway, with an unchanged FV of RM3.31, based
on a 20% discount to our SOP valuation. We do not rule out the possibility of Sunway
winning more MRT packages moving forward since the company has an excellent track
record.
Buy
Fair value: RM3.31
Price: RM2.37
[Source]
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