KUCHING: Sunway Bhd (Sunway) is set to further unlock its value with the re-listing of its construction and precast business.
RHB Research Institute Sdn Bhd (RHB Research) noted that Sunway plans to list its construction & precast business unit, and the listing vehicle will be named Sunway Construction Group Berhad (SCG). SCG will have 1,293 million share base.
The research house said that upon listing, Sunway will retain control of at least 51 per cent. The new SCG shares will be distributed by way of dividend-in-specie to Sunway’s shareholders, based on entitlement of one SCG share for every 10 Sunway shares held.
Sunway’s shareholders will also enjoy a special cash dividend.
“Given the company’s expected earnings base and RM3.4 billion outstanding orderbook, SCG will be comparable to the top-tier listed construction companies. Note also, that most of the peers are not pure construction play, as they have exposure to the property development segment.
“Unlike its peers, SCG will be more likely to secure consistent flow of construction works as more property investment assets will be built, and property projects will be undertaken by Sunway.
Hence, this could ensure sustainable earnings growth for SCG. This year, management is confident to hit RM2.5 billion orderbook replenishment.
“Given the prospects and the recent successful debut of Econpile, a small cap construction company, we think a valuation multiple of 13 times is justifiable,” said RHB Research analysts.
Assuming a 13 times price earnings ratio on estimated profit after tax and minority interest (PATMI) of RM120 million, SCG could potentially be worth RM1.56 billion, which translates into RM1.21 per share.
As management emphasises that allocation of proceeds for working capital purpose is limited and gearing for SCG will be minimal, about 35 per cent of the proceeds will be paid out as special cash dividend.
This works out to be about 25-30 sen per share.