PP 7767/09/2010(025354)

1 March 2010
RHB Research
Malaysia Institute Sdn Bhd
Corporate Highlights A member of the
RHB Banking Group
Company No: 233327 -M

R e su lt s N o te 1 March 2010
MARKET DATELINE

Sunway City Share Price

Fair Value
:
:
RM3.30
RM5.33
Targets RM1bn Sales For FY10 Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (SUNCITY; Code: 6289) Bloomberg: SCITY MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
June (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2008# 1329.5 136.1 29.0 16.2 11.4 - 3.4 1.1 8.1 0.6 2.4
2009**# 1070.3 148.8 31.7 9.4 10.4 - 1.4 0.7 6.8 0.5 3.9
2010f 1361.6 163.4 34.8 9.8 9.5 33.0 6.1 0.7 7.1 0.5 2.4
2011f 1443.7 182.3 38.8 11.6 8.5 37.0 5.7 0.6 7.4 0.5 2.4

Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC #normalised **annualised * Consensus Based On IBES

RHBRI Vs. Consensus

♦ Within expectation. Excluding one-off depreciation charge of RM5.8m due to Above
asset reclassification, RM10.5m one-off upfront fee for banking facilities, In Line
RM356.3m net revaluation gain in 6QFY12/09 (Sunway Pyramid Shopping Mall Below
– RM265.4m; Sunway Carnival Mall – RM43.9m; others – RM47m) and
Issued Capital (m shares) 469.9
RM130.8m net revaluation gain in FY08, the company reported 18MFY12/09
Market Cap(RMm) 1,550.7
normalised net profit of RM223.2m (+2.4% yoy). This was in line with our
Daily Trading Vol (m shs)
expectation, accounted for 101.8% of our 18-month projection (due to the
52wk Price Range (RM)
change in FYE from June to Dec). However, it beat consensus estimates by Major Shareholders: (%)
22.6%. The company has proposed a 5 sen final gross dividend for the quarter, Tan Sri Dato’ Seri Dr 40.3
bringing FY09 total gross dividend to 13 sen (or 3.9% yield), This beats our Cheah Fook Ling
Government of Singapore 21.4
previous dividend forecast of 10 sen by 30%. Investment Corporation

♦ Improving property sales. The company’s property sales have improved by

14% from RM136m in 5Q09 to RM155m in 6Q09, bringing ytd sales to RM550m. FYE Dec FY09 FY10 FY11
The company’s sales had exceeded its 2009 internal target of RM330m by EPS chg (%)
24.2%. Stronger sales were mainly due to improving property demand, low Var to Cons (%)

mortgage rate environment as well as attractive marketing strategy offered by PE Band Chart
Sunway City. In view of better economic outlook and property demand, the
company intends to launch RM1.47bn worth of projects in FY10 and set RM1bn PER = 11x
PER = 9x
sales target (+144% yoy, from 2009 sales of RM410m). As at Dec 09, the PER =7x
PER = 5x
company had unbilled sales of RM637m, or 1x of our FY10 property
development revenue. However, there is no update from the MOU to develop
land in Tianjin, China yet.

♦ REIT-ing its assets in 2H10… The company has appointed RHB Investment
and Credit Suisse Ltd as financial advisers for the proposed listing of its REIT.
Relative Performance To KLCI
The company is looking to float its investment property assets via REIT by
2H10, at the earliest.

♦ Forecasts. No change to our earnings forecasts. However, we have raised our

RNAV per share from RM5.07 to RM6.27 to factor in the asset revaluation
Sunway City
exercises (excluding hotel assets which are under the property, plant and
equipment category).
FBM KLCI
♦ Risks. The risks include: 1) competition from peers; 2) delays in launches and
approvals; 3) rising raw material prices; and 4) country risk.

♦ Investment case. Our indicative fair value has been raised from RM4.31 to
Low Yee Huap, CFA
RM5.33, based on 15% discount to its RNAV. We are maintaining our (603) 92802237
Outperform rating on the stock. low.yee.huap@rhb.com.my

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Table 2. Suncity Quarterly Results

FYE Dec (RMm) 2Q09 5Q09 6Q09 QoQ YoY 18M08 18M09 YoY Comments
(%) (%) (%)

Turnover 318.1 253.9 258.4 1.8 (18.8) 1,914.7 1,605.4 (16.2) Yoy decline mainly due to poor performance from
its property development division.
Prop dev 124.5 79.6 61.3 (23.0) (50.7) 923.5 541.8 (41.3) Yoy decline was mainly dragged down by weak
property market and economic outlook in end-08-
early 09. However, property sales have started to
pick up since 4QFY12/09. As at Dec 09, the
company has unbilled sales of RM637m or 1x of our
FY10 projected property development revenue.
Prop invt 64.0 67.9 74.6 9.9 16.7 349.6 410.5 17.4 Stable occupancy and improving rental rate.
Leisure 39.0 29.5 36.1 22.1 (7.6) 183.4 184.0 0.3 Marginal yoy improvement due to weak economic
outlook and H1N1 outbreak in the beginning of
FY12/09.
Hospitality 59.4 46.8 54.5 16.5 (8.2) 296.2 288.6 (2.6) Due to weak economic outlook and H1N1 outbreak
in the beginning of FY12/09.
Healthcare 31.2 30.0 31.9 6.1 2.0 177.0 180.5 2.0

EBIT 79.3 66.7 872.4 >+100 >+100 870.9 1,259.6 44.6 Due to revaluation gains in FY09 from its property
investment division.
Prop dev 19.4 9.3 9.8 5.0 (49.4) 197.2 114.6 (41.9) Same as turnover.
Prop invt 40.0 40.9 848.5 >+100 >+100 545.2 1,061.7 94.7 Yoy improvement due to revaluation gains (Sunway
Pyramid Shopping Mall – RM680.4m; Sunway
Carnival Mall – RM58.5m; others – RM66m).
Leisure 12.6 4.9 10.5 >+100 (16.9) 47.3 35.3 (25.4) Same as turnover.
Hospitality 6.2 13.3 6.7 (49.7) 7.4 76.2 52.0 (31.7) Same as turnover.
Healthcare 1.0 (1.7) (3.1) 76.1 >-100 7.2 (3.9) >-100 Yoy decline due to interruption from the extension
works on existing hospital and higher fixed costs.
Sunway Medical Centre’s expanded from 207 beds
to 350 beds.
Others 0.0 0.0 0.0 Na Na 0.0 0.0 Na

Finance cost (19.3) (14.7) (16.2) 9.8 (16.3) (114.8) (101.5) (11.6) Net gearing has improved from 0.61x (5Q09) to
0.53x (6Q09) mainly due to significant increase in
shareholder fund arising from asset revaluation
exercise.
Asso & jv 4.6 16.5 13.2 (20.4) >+100 21.8 54.0 >+100 Yoy improvement due to stronger contribution from
50%-owned Sunway SPK.
Other Income 0.0 0.0 0.0 Na Na 0.0 0.0 Na
Pretax profit 64.5 68.5 869.4 >+100 >+100 778.0 1,212.2 55.8
Tax (15.9) (18.2) (213.3) >+100 >+100 (208.8) (294.4) 41.0
PAT 48.6 50.3 656.1 >+100 >+100 569.2 917.9 61.3
MI (12.8) (17.2) (261.4) >+100 >+100 (226.3) (354.6) 56.7
Net profit 35.9 33.1 394.7 >+100 >+100 342.9 563.2 64.3 Excluding one-off depreciation charge of RM5.8m
due to asset reclassification, RM10.5m one-off
upfront fee for banking facilities, RM356.3m net
revaluation gain in 6QFY12/09 (Sunway Pyramid
Shopping Mall – RM265.4m; Sunway Carnival Mall –
RM43.9m; others – RM47m) and RM130.8m net
revaluation gain in FY08, 18MFY12/09 normalised
net profit was RM223.2m (+2.4% yoy), within our
expectation but above consensus estimates.

EPS (sen) 7.6 7.1 84.0 >+100 >+100 73.8 119.8 62.5
NTA (RM) 3.8 3.9 4.7 20.3 24.8 3.8 4.7 24.8
DPS (sen) 0.0 0.0 5.0 Na Na 8.0 13.0 62.5 Above our expectation. 13 sen gross dividend for
FY09 was 30% higher than our previous forecast of
10 sen.

EBIT Margin (%) 24.9 26.3 337.7 45.5 78.5

Prop dev 15.6 11.7 16.0 21.4 21.1
Prop invt 62.6 60.3 1136.8 156.0 258.7
Leisure 32.3 16.5 29.1 25.8 19.2
Hospitality 10.5 28.4 12.3 25.7 18.0
Healthcare 3.3 (5.8) (9.6) 4.1 (2.1)
PBT margin (%) 20.3 27.0 336.5 40.6 75.5 Excluding exceptional items, 18MFY09 PBT margin
was 26.7%, from 24.2% in 18MFY08.
Normalised tax rate 24.7 26.6 24.5 26.8 24.3 Due to utilisation of unabsorbed losses and
(%) unutilised capital allowances of certain subsidiaries.

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Table 3. Earnings Forecasts

FYE Dec (RMm) FY08a FY09a^ FY10F FY11F

Revenue 1,329.5 1,605.4 1,361.6 1,443.7

Prop dev 699.5 541.8 627.5 667.3
Prop invt 216.8 410.5 277.2 304.9
Leisure 113.3 184.0 121.9 128.0
Hospitality 184.9 288.6 204.9 206.9
Healthcare 115.1 180.5 130.0 136.5
Operating profit 700.3 1,259.6 348.5 374.1
Prop dev 151.0 114.6 113.0 120.1
Prop invt 460.7 1,061.7 166.3 183.0
Leisure 30.5 35.3 24.4 25.6
Hospitality 52.9 52.0 41.0 41.4
Healthcare 5.2 -3.9 3.9 4.1
Interest expenses (76.9) (101.5) (107.5) (112.9)
PBT 637.8 1,212.2 346.7 367.0
Tax (167.8) (294.4) (83.3) (104.6)
MI (203.1) (354.6) (100.0) (80.0)
Net profit 136.1 563.2 163.4 182.3
Normalised net profit 136.1 223.2 163.4 182.3
EPS (sen) 29.0 119.8 34.8 38.8
DPS (sen) 8.0 13.0 8.0 8.0

^ 18-month results due to change in FYE

Source: Company data, RHBRI estimates

Table 4: Computation of RNAV

Book Value
Development Properties Revalued (RM m) Surplus (RMm) SCB’s share (RMm)
(RM m)
Sunway Damansara 307.1 60.0 247.1 148.3
Sunway Palazzio 28.7 16.0 12.7 6.4
Sunway South Quay 423.2 230.0 193.2 59.9
Sunway Kayangan 7.0 5.0 2.0 2.0
Sunway SPK 183.0 35.0 148.0 74.0
Sunway Melawati 99.3 46.0 53.3 53.3
Sunway City Ipoh 202.8 61.0 141.8 92.2
Sunway Semenyih 145.8 121.0 24.8 17.4
Sunway City Penang 50.9 6.0 44.9 44.9
Sunway Grand 13.1 6.0 7.1 7.1
Sunway Crest 31.3 14.0 17.3 17.3
Sunway Cheras 7.0 3.0 4.0 4.0
Sunway Suria 50.5 30.0 20.5 10.3
Taman Duta 34.4 27.5 6.9 6.9
Bukit Rimau 19.9 0.0 19.9 19.9
Wonderland Sydney 129.2 5.0 124.2 19.0
Total 1,733.2 665.5 1,067.7 582.7

Hotels
Sunway Resort Hotel & Spa 346.1 267.0 79.1 41.2
Pyramid Tower Hotel 244.4 147.0 97.4 50.7
Sunway Hotel Georgetown 40.8 27.0 13.8 13.8
Sunway Hotel Seberang Jaya 42.4 30.0 12.4 12.4
Sunway Hotel Phnom Penh 31.1 31.0 0.1 0.0

DCF- Sunway Opus Grand Residency (WACC:

14.8%) 38.0
DCF- Sunway MAK- Maheswaram (WACC: 14.8%) 9.6

Revaluation surplus (RMm) 748.4

Shareholders funds @ Dec 09 (RMm) 2,197.7
RNAV (RMm) 2,946.0
Number of shares outstanding (m) 470.0
RNAV per share (RM) 6.27

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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. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may
from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy
will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans
of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher
risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

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.

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