Sunway excited over Iskandar project

From Star Online: Business
29th June 2013

IT may seem rather nondescript but the appointment of joint managing directors and the presence of Kumar Tharmalingam over at the Sunway group may be an indication of the direction the company would like to take. Or at least, the market it would like to have.

Sarena Cheah and Ong Pang Yen were appointed as joint managing directors of the property development division at Sunway Bhd effective May 1. They replace Ho Hon Sang who left at the end of last month.

Higher rerating in the pipeline for Iskandar?

From Star Online: Business
1st April 2013

PETALING JAYA: Property players with exposure to Iskandar Malaysia could see a rerating in the pipeline, following the planned listing of Iskandar Waterfront Holdings Sdn Bhd (IWH) in the fourth quarter of this year.

Maybank IB Research analyst Wong Wei Sum said better connectivity in the area via the rapid transit system (RTS) between Singapore and Johor and the KL-Singapore high speed rail, coupled with rising business activities and an increasing population should further lift land and property prices in Iskandar.

Wong highlighted in the report on property developers in Iskandar that the key beneficiaries include UEM Land Holdings Bhd, Sunway Bhd,Genting Plantations Bhd, IJM Land Bhd, S P Setia Bhd, Dijaya Corp Bhd, Crescendo Corp Bhd, Eastern & Oriental Bhd and KSL Holdings Bhd.

Sunway re-rated based on its RM30bil Iskandar development

From Star Online: Business
27th March 2013

PETALING JAYA: The 1,770 acres with a gross development value (GDV) of RM30bil Sunway Bhd owns in the Iskandar region and its plan to pay out dividends semi-annually are deemed as catalysts, UOB KayHian Research says.

In a report, the research house revised Sunway's target price to RM3.48 from RM2.98 as it removed the 10% discount to sum-of-the-parts. The new target price implied a 12 times 2014 forecast price-to-earnings (PE), which was slightly higher than its historical mean PE of 11 times, and remained a “buy” rating.

The research firm said: “Given that Sunway Iskandar makes up almost 30% of Sunway's revised net asset value, the market will eventually recognize Sunway as one of the key proxies to the Iskandar theme. We believe that re-rating should continue when earnings contribution begins in 2014.”

Sunway Bhd - Selldown Overdone; Upgrade to BUY

By Maybank IB Research
29 Aug 2012

An overdone hammering. 1H12  results  were below expectations. However,  earnings should pick up in  2H on stronger work progress (construction) and  investment properties performance. We  lower our earnings forecasts by 2-6% p.a. but raise TP to MYR2.68 (+6sen; 40% discount to MYR4.46 RNAV).  Sunway currently trades at 7.1x  FY13 PER and  a  50% discount to RNAV. We believe the  stock selldown brought about by slower property sales is overdone. Upgrade to BUY.

Sunway - Cutting sales target and postponing launches

By Am Research

3 July 2012

-  We reaffirm our HOLD rating on Sunway Bhd (Sunway), but with our fair value cut to RM2.60/share (from RM2.70share), pegged to a 25% discount to its revised sum-of-parts value of RM3.50/share (RM3.60/share previously).

-  The lower fair value is on the back of a lower new sales assumption for FY12F following management’s revisions in planned launches and the sales target for this year. We are looking at new sales of RM850mil-RM900mil for FY12F, vs. RM1.5bil previously. 

Sunway - Earnings to be stronger in the coming quarters Hold

By Am Research
30 May 2012

- We reaffirm our HOLD rating on Sunway Bhd (Sunway) with our fair value unchanged at RM2.70/share, assigning a 25% discount to our sum-of-parts value of RM3.60.share.

- Sunway’s 1QFY12 net income came in at RM64mil, which is short of our, and street’s expectations covering only 19% and 18% of full-year estimates, respectively. No dividend was declared for the quarter.

- Earnings slid by 35% QoQ on the back of a 15% drop in revenue. This can be explained by slower progress billings, for which there was a 34% drop in property development revenue. However, this was offset by stronger profit recognitions from its Singapore projects.

- Similarly, the construction division was weaker QoQ – margins down to 3% from 8% – as there was a strong contribution from its Abu Dhabi projects in the previous quarter, while there was a slight delay in the LRT extension works. 

- However, we are sticking to our estimates, with the group currently sitting on a record construction order book of close to RM4bil, taking into account YTD contract wins and healthy unbilled sales of RM2.2bil. Earnings should recover in the coming quarters as construction of its property and infrastructure projects pick up pace.

- To recap, the group has already met its RM1.5bil order book renewal target, with about 27% of the value consisting of in-house jobs, i.e. substructure works for Sunway Velocity. 

- Although Sunway is still in the mix for other MRT packages (viaduct and station), we believe WCT and IJM are favourites for the station works and having already won the V4 package, Sunway may find its chances limited for any one of the remaining viaduct packages.

- Sunway is currently trading at quite a steep discount (36%) to its SOP and one of the cheapest stocks in our conglomerate coverage – trading at a CY12F PE of 9x vis-a-vis its peers of 17x. While the stock looks attractive, there are no near term catalysts. 

HOLD

Price: RM2.29

Fair Value: RM2.70

[Source]

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 - Property sales target is a challenge HOLD

By Am Research

23 Apr 2012

- We reaffirm our HOLD recommendation on Sunway Bhd (Sunway) with our fair value cut to RM2.70/share (from RM2.85/share previously), assigning a 25% discount to our revised sum-of-parts of RM3.60/share as we assume slower property sales for FY12F and FY13F.

- The key highlight from our meeting is that Sunway has turned more cautious on the property sector. We understand YTD sales have been rather subdued – Sunway managed to record new sales of only RM100mil (up to February) versus about RM200mil achieved in the corresponding period last year. Sales have been largely driven by terraced units in Shah Alam, commercial units at Nexis and Singapore products. 

- It seems that the weak sales were largely due to the 70% LTV ruling introduced to the market in November last year. This is not a surprise as Sunway’s pricing for its products have always been on the high side and 70% of its planned launches are priced at least RM1mil per unit. Nonetheless, we acknowledge that its developments are mostly located at favourable locations. 

- As a result, the group has deferred its initial 2012 launches to 2Q2012. Among the key launches deferred are the commercial properties in Sunway South Quay – comprising 31 units of 3-storey shop offices priced at RM6mil & above, Sunway Montana in Desa Melawati and commercial properties in Penang. 

- We therefore believe it may be a challenge for Sunway to meet its RM1.9bil sales target this year. We have cut our new property sales assumption by 20%-25% to RM1bilRM1.5bil for FY12F-FY13F. Consequently, we have slashed our earnings by 4%-5% for FY12F-FY13F to RM344.2milRM417mil.

- Having said that, the group is currently sitting on a healthy construction order book and property unbilled sales of RM2.8bil and RM2.2bil, respectively.  

- Additionally, we are quite positive on Sunway’s chances of winning one of the remaining MRT packages, given that it has the cost advantage over its competitors due to its inhouse piling capabilities. We note that piling work accounts for 20%-30% of the elevated package or circa RM200mil-RM300mil. Thus, we do not believe it would be an issue for Sunway to meet its order book renewal target of RM1.5bil.

- Sunway is currently trading at quite a steep discount (30%) to its SOP and one of the cheapest stocks in our conglomerate coverage – trading at CY12F PE of 11x vis-avis its peers of 17x. While the stock looks attractive there are no near term catalysts.

Price- RM2.52 

Fair Value- RM2.70

[Source]

Sunway Bhd - Eyeing KGNS land for redevelopment? HOLD

By AmResearch
16 Apr 2012

- It has been reported in the press that Tan Sri Syed Mokhtar – via his private entity – and Sunway Bhd have submitted a proposal to redevelop Kelab Golf Negara Subang (KGNS) with a commercial value of RM5bil. 

- The golf club, which was opened in 1968, boasts a land size of 330 acres, which sit squarely in the middle of established and developed areas of Subang Jaya, Kelana Jaya, Ara Damansara and Bandar Sunway. 

- The prime land is owned by the government and is currently halfway through its 99-year lease.

- This is not something new as there have been rumours in the market that the government is looking at reclaiming control of this land, with a view to liquidate this prime land to developers. This of course has been opposed strongly by members, as many view the club – which was initiated by Tunku Abdul Rahman – as an iconic institution and its members are mostly made up of ex-top civil servants.

- Given the circumstances, we are of the view that it would be a massive challenge for the interested parties to get hold of this prime land.

- Similarly, it is believed Sime Darby’s proposal to redevelop Kelab Golf Perkhidmatan Awam (KGPA) – which also sits on a prime land within Damansara/Petaling Jaya –  for high-end residential units has been met with strong opposition.

- This just shows the lack of prime land for development in the market and this will continue to drive strong land prices going forward. 

- We maintain our HOLD rating on Sunway with our fair value unchanged at RM2.85/share

Price- RM2.59

Fair value- RM2.85


[Source]