not vested
AmResearch retains Buy for Sunway
KUALA LUMPUR: AmResearch is maintaining its Buy recommendation for Sunway, with an unchanged fair value of RM3.74 a share, based on a 20% discount to the sum-of-parts value of RM4.65 a share.
It said on Wednesday Sunway is facing headwinds in its property development division, with a likely decline in sales in FY15F versus FY14’s RM1.7bil (effective: RM1.3bil) and its target of RM1.7bil (effective: RM1.2bil) for FY15F.
For 1HFY15, it posted RM500mil sales and targets the same for 2H.
“We believe any blip in property revenue will not significantly hurt its long-term prospects, with unbilled sales at RM2.5bil (effective: RM1.8bil) as at end-March while its other divisions will cushion the impact,” it said.
AmResearch said the construction unit – Sunway Construction Group Bhd – will make its debut on the Main Market of Bursa Malaysia Securities on July28.
The recent oversubscription of its institutional offer for sale by 4.6 times reflects market demand for a pure-play construction group.
“Based on our FY15F PAT projection and at a PE of 13 times, Sunway Construction Group is valued at RM1.17 a share – in line with the IPO price of RM1.20 a share. Construction stocks are currently trading at valuations of 12 times to 17 times PE multiples.
“Sunway Construction Group can count on RM500mil-RM800mil worth of jobs annually, a robust domestic construction sector and HDB public housing development in Singapore.
“We are assuming an annual order book renewal of RM1.8bil vs. SCG’s target of RM2bil. As at end-March 2015, Sunway Construction Group’s outstanding order book stood at RM2.76bil – 1.5x FY14’s revenue of RM1.9bil.
“We project FY15F-FY17F PAT at RM117-137mil. Sunway Construction Group will pay out at least 35% of profit, a yield of 2.6% for FY15.
“Maintain Buy for long-term exposure to Iskandar Malaysia. Sunway is paying out a special dividend of 25 sen-28 sen a share – translating into a yield of 7%-8%, apart from an expected regular dividend of 10 sen a share,” it said.
Source: The Star