Tuesday, December 20, 2011

HDBSVR keeps Buy call on Sunway, TP of RM3.30

KUALA LUMPUR (Dec 20): Hwang DBS Vickers Research said Sunway Bhd's valuations remain cheap at 8.0 times FY12F price-to-earnings and 1.0 times price-to-book value on the back of three-year EPS CAGR of 9%.

'We maintain our BUY rating and TP of RM3.30 based on a 10% discount to SOP valuation,' it said on Tuesday.

On Monday, Sunway announced a joint venture with Khazanah Nasional to acquire a 691-acre land lease in Zone F Medini Iskandar for RM745 million (or RM25 per sq ft).

'This appears cheap versus recent land deals of RM38-RM65 psf. It will initially own 38% in the JV, rising to 60% in 54 months via additional equity subscriptions,' it said.

HDBSVR said while there will be no immediate impact on Sunway's balance sheet (net gearing of 0.5 times) and profit will be equity accounted (38%), impact will be more significant upon reaching 60% stake.

'We do not discount the possibility of a rights issue later given the magnitude of the deal. The total GDV for this 10-year project is RM12 billion with an implied pricing for the residential portion at RM400 psf and commercial at 15%-20% higher. We think this is conservative given its prime location at Medini Living, the southern most tip of Medini Node, existing infrastructure in place and just five minutes drive from the second link,' it said.

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