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PP 7767/09/2010(025354)

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

N ew s Updat e
6 September 2010

Sunway Holdings Share Price

Fair Value
A Fourth Property Project In Singapore Recom : Outperform

Table 1 : Investment Statistics (SUNWAY; Code: 4308) Bloomberg: SGW MK

Turn- Net FD Net
FYE over Profit EPS# Growth PER EPS# C.EPS P/CF P/NTA ROE Gearing GDY
Dec (RMm) (RMm (sen) (%) (x) (sen) (sen) (x) (x) (%) (%) (%)
2009** 2,589.9 109.3 13.6 (27.0) 12.0 - - 10.1 1.5 9.5 0.6 1.4
2010f 2,519.8 137.1 22.8 67.9 7.1 17.9 20.0 13.2 1.3 15.1 0.5 1.7
2011f 2,519.2 151.1 25.2 10.2 6.5 19.5 23.0 16.4 1.1 14.3 0.4 1.7
2012f 2,960.0 170.1 28.3 12.5 5.8 21.8 25.0 13.3 0.9 13.9 0.3 1.7
Main Market Listing /Non-Trustee Stock / Syariah-Approved Stock By The SC #Excluding EI * Consensus Based On IBES
**18M ^Annualised

Issued Capital (m shares) 602.0

♦ A fourth property project in Singapore. Sunway and local partner Hoi Market Cap (RMm) 981.3
Hup Realty have won the bid for a piece of 99-year leasehold state land in Daily Trading Vol (m shs) 0.8
Singapore known as “S5b” located at Miltonia Close for S$165m (RM384m). 52wk Price Range (RM) 1.17-1.66
A 70:30 JV between Hoi Hup Realty/Hoi Hup JV Development and Sunway Major Shareholders: (%)
Tan Sri Jeffrey Cheah 43.3
has been set up to undertake the project, we understand, with a total GDV of
S$370m (RM861m). The project is expected to be completed within six
years from Sep 2010. This is Sunway’s fourth property JV with Hoi Hup
Group in Singapore. The first three, also based on the same 30:70 equity FYE Dec FY10 FY11 FY12
structure, have done very well (see Table 2). Assuming a PBT margin of EPS Revision (%) - - -
20%, we estimate that the latest property project will earn Sunway about Var to Cons (%) +14 +9 +13

RM52m over the project period.

PE Band Chart
♦ Positive. We are positive on the latest development. The latest property
project will help sustain Sunway’s property profits from Singapore beyond PER = 10x
PER = 8x
the next 2-3 years, upon the completion of the first three projects. In PER = 6x
FY12/10-12, we project property profits from Singapore to contribute 18- PER = 4x

26% to group PBT.

♦ Forecasts. Maintained as we only expect meaningful contribution from the

latest project beyond our forecast period ending 31 Dec 2012.

♦ Risks to our view. The risks include: (1) New construction contracts
secured in FY12/10-12 coming in below our target of RM1.5bn per annum; Relative Performance To FBM KLCI
and (2) Rising input costs.

♦ Maintain Outperform. We are upbeat on the construction sector as we FBM KLCI

foresee construction stocks to generally outperform the market in 2H2010,

buoyed by news flow, particularly, from: (1) The RM36bn KL MRT project;
(2) The RM7bn Ampang and Kelana Jaya LRT line extension project; and (3) Sunway Holdings

Federal land deals. Sunway has been pre-qualified to bid for the LRT line
extension project as main contractor as well as segmental box girder sub-
contractor. Also, additional kickers will come from Sunway’s expected firm
construction margins over the next few quarters thanks to strong
contributions from the high-margin pre-cast concrete components contract in
Singapore and Rihan Heights project of the Arzanah Development in Abu
Dhabi, UAE. Also, Sunway’s property profits will be strong, driven by
boutique developments in Malaysia and high-rise residential projects in
Singapore. Indicative fair value is RM2.35 based on 12x fully-diluted Joshua CY Ng
FY12/11 EPS of 19.5sen, in line with our benchmark 1-year forward target (603) 92802151
PER for the construction sector of 10-16x.

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Table 2: Sunway’s Property Projects In Singapore
City View @ Boon Keng The Peak @ Toa Payoh Jalan Senang Miltonia Close

GDV S$421m (RM1bn) S$680m (RM1.65bn) S$420m (RM1bn) S$370m (RM861m)

Sunway’s stake (%) -------- 30 --------

Launched when Jan 08 Jun 09 Mid-2010 NA

JV partner ---------- Hoi Hup, a Singapore-based private property group (70%) --------
Project description 714 residential units in 1,203 residential units in 500 high-rise private NA
three 40-storey towers in a five 40- and 42-storey housing units
short distance away from towers three MRT stops
Singapore’s Central away from the Orchard
Business District (CBD) and Road
Marina Bay
Selling price S$530 psf S$520 psf NA NA
Take-up rate 100% 90% NA NA

Source: Company

Table 3: Outstanding Construction Orderbook

Project Outstanding Works
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (excluding M&E and stone & tiling works) 389^
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (M&E) 187*
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (stone & tiling works) 43#
Pre-cast concrete components in Singapore 255
Al Reem Island, Abu Dhabi 89
Road projects in India 46
Total 1,009

Government office in Putrajaya 250
Sunway Velocity (shop-offices & apartments) 207
Hotel and office in Putrajaya 137
Dairy product factory in Klang, Selangor 129
Sunway office tower (substructure) 88
Impiana KLCC (Phase 2) 84
Infrastructure in Putrajaya 70
Others 105
Total 1,070

Grand Total 2,079

^60% share of RM649m *75.1% share of RM249m #70% of RM62m
Source: Company, RHBRI

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Table 4: Earnings Forecasts Table 5: Forecast Assumptions
FYE Dec (RMm) FY09a* FY10F FY11F FY12F FYE Dec FY10F FY11F FY11F

Turnover 2,589.9 2,519.8 2,519.2 2,960.0 Construction EBIT margin (%) 8.6 7.5 6.8
Turnover growth (%) -5.3 45.9 0.0 17.5 New orderbook secured (RMm) 1,500 1,500 1,500

EBITDA 178.8 248.7 240.4 261.4

EBITDA margin (%) 6.9 9.9 9.5 8.8

Depreciation -43.0 -45.1 -47.4 -49.8

Net Interest -54.0 -28.4 -26.7 -25.0
Associates 72.2 38.3 58.0 58.0
EI 0.0 0.0 0.0 0.0

Pretax Profit 153.9 213.5 224.3 244.6

Tax -33.9 -44.7 -50.8 -57.7
PAT 120.1 168.9 173.5 187.0
Minorities -10.8 -31.7 -22.3 -16.9
Net Profit 109.3 137.1 151.1 170.1
*18M ^Annualised
Source: Company data, RHBRI estimates


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
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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
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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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.

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