Table 1 : Investment Statistics (SUNWAY; Code: 5211)

Transcription

1 Malaysia PP 7767/09/2012(030475) MARKET DATELINE Corporate Highlights Briefing Note Sunway Berhad Tying Up With Khazanah RHB Research Institute Sdn Bhd A member of the RHB Banking Group Company No: M 20 December 2011 Share Price : RM2.37 Fair Value : RM2.42 Recom : Market Perform (Maintained) Table 1 : Investment Statistics (SUNWAY; Code: 5211) Net Issued Capital (m shares) 1,292.5 Market Cap (RMm) 3,063.2 Daily Trading Vol (m shs) wk Price Range (RM) Major Shareholders: (%) Tan Sri Dato Seri Dr 45.0 Jeffrey Cheah GIC 12.5 FYE Dec FY11 FY12 FY13 EPS chg (%) Var to Cons (%) (2.0) (4.6) (0.1) PE Band Chart Bloomberg: SWB MK FYE Turnover Profit # EPS # Growth PER C.EPS* P/CF P/NTA ROE Gearing NDY Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%) , f 3, (9.1) f 3, f 4, Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC * Consensus Based On IBES Estimates # Normalised Going into Medini. Sunway Bhd announced that it has entered into a subscription and shareholders agreement (SSA) with Khazanah to establish a JV namely Semerah Cahaya S/B (SCSB). SCSB will acquire leases of up to 99 years over a 691-acre piece of land in Zone F Medini Iskandar. Total purchase consideration of RM745.3m translates into a land cost of RM24.73 psf. Sunway is required to pump in an intial equity investment of RM136.8m, and will subsequently subscribe for additional shares in the JV for RM198m in four tranches (RM49.5m p.a.) commencing on the 18 th month from the date of the lease purchase agreement. This means Sunway will have an initial equity stake of 38%, and gradually increase to 60%. The initial investment will be funded mainly via internal funds, but management does not rule out a cash call (i.e. rights issue) going forward to strengthen the company s financial position to take on the project. Sunway s current net gearing stands at 0.46x. Good project but fairly competitive. We have no concerns on the JV, given the strong backing of Khazanah. Land cost is cheaper compared to E&O s RM38 psf. This integrated development project will be named Sunway Iskandar (SI), and is estimated to yield a GDV of RM12bn. We like the area given that it is very close to the 2 nd link CIQ (just 5 min away). However, in our view, this is a brave move for Sunway. We have three key concerns: (i) Intense competition is foreseen. SI is right next to E&O s 210-acre JV project (GDV RM3bn) at Medini Central. Both projects are big. Sunway s products will leverage on the natural environment features (mangrove reserve and river), differentiating itself from E&O s wellness concept. Both E&O and Sunway similarly have the backing of Temasek and GIC from Singapore at project and company level, and are targeting at the foreigners market, and will start around the same time in end 2012/early Both E&O and Sunway have strong foreigners market presence E&O: Singapore and Japan (via Mitsui), Sunway: Australia, China, India, and Singapore. Other developers which have residential projects in Medini include UEM Land, WCT and Bina Puri; (ii) Unlike E&O, Sunway does not have an option to move in phases. This is an additional business risk to Sunway if SI underperforms the others; and (iii) Unless the initial phase is proven to be successful (post 2013), we think the market may not like the rights issue exercise if Sunway is to propose it before Risks and concerns. i) delays in project launches; iii) new contracts secured in FY12 coming in below our target; and iv) country and macro risk. Forecasts. No change in our earnings projections as earnings contribution is expected to kick in from 2014 onwards. Maintain Market Perform. Due to the incremental value in our RNAV estimate, our FV is raised to RM2.42 (from RM2.30), based on 40% discount to RNAV. PER = 12x PER = 11x PER = 10x Net Relative Performance To FBM KLCI FBM KLCI Sunway Berhad Loong Kok Wen, CFA (603) loong.kok.wen@rhb.com.my Please read important disclosures at the end of this report. Page 1 of 5

2 Table 2: SOP valuations Landbank Size (acres) GDV (RM mil) Equity interest 10% (RM mil) Malaysia Sunway South Quay 52 3,893 60% Sunway Velocity 22 2,000 50% Sunway Damansara % Sunway Semenyih % Integrated Resorts % Melawati % Sunway Tower % Casa Kiara % Suria % 4.57 Taman Duta % 5.83 Penang 108 1, % Johor Iskandar % Sunway Iskandar - Medini Living ,000 60% Ipoh % Others % 1.78 Taman Equine % Bangi % 3.77 Melawati % 3.30 Sg Long Balakong % Mont Putra % Overseas Opus, India % MAK, India % 3.69 Guanghao, China % Tianjin, China 102 5,000 60% Australia % Yishun, Singapore % Tampines, Singapore 5 1,070 30% Yuan Ching Rd, Singapore % Sembawang, Singapore % 7.60 Sri Lanka % 3.96 Pasir Ris, Singapore % Unbilled sales Subtotal 1, Investment properties EBITDA Market value Book value Equity Net surplus (RM mil) (RM mil) (RM mil) interest (RM mil) Monash University Campus % 0.0 Sunway University College % 0.0 Sunway Hotel Georgetown % 0.0 Sunway Medical Centre % 0.0 Sunway Hotel Phnom Penh % 0.0 Sunway Hotel Hanoi % 0.0 Sunway Giza % 0.0 Subtotal 0 Other divisions Market value Book value FY12 EPS PE target Equity value surplus (RM mil) (RM mil) (sen) (x) (RM mil) Construction , % Sunway REIT 1, Subtotal 1, Total 2, FY10 Proforma NTA 2, Total RNAV 5, Share base (mil) 1, No. of warrants Warrants RM Total SOP value 6, Enlarged share base (mil) 1, Fully diluted RNAV per share 4.03 Discount 40% Fair value (RM) 2.42 * Equity value surplus = equity value of the construction division based on PE minus estimated BV of Sunway Holdings to avoid double counting (the discounted PE target for the construction division is 8x) Source: Company, RHBRI Page 2 of 5

3 Fig 1: Location of Sunway Iskandar and E&O s land E&O s JV project with Khazanah/Temasek Source: Company Page 3 of 5

4 Fig 2: Location of Medini Source: Company Page 4 of 5

5 Table 3. Earnings Forecasts FYE Dec (RMm) FY10 FY11F FY12F FY13F Revenue 3, , , ,153.3 Gross Profit 1, , , ,599.9 EBIT Interest income Finance costs (101.2) (122.0) (103.8) (98.4) PBT ,084.7 Exceptional item Tax + minority interest (29.0) (601.8) (629.6) (705.1) Normalised net profit Normalised EPS Gross DPS Dividend payout Source: Company, RHBRI estimates IMPORTANT DISCLOSURES This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. 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Industry/Sector Ratings Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon request. This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect. Page 5 of 5