Thursday, May 10, 2012

Sunway Berhad: Maintain HOLD - Bags MYR1.2b MRT Contract

By Maybank IB Research
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)
[Source]

SUNWAY (FV RM3.31- BUY) Corporate News Flash: MRT Job Well Expected

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

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