Sunway’s long term earnings remain robust


KUCHING: Sunway Bhd’s (Sunway) long term earnings remain intact, says AllianceDBS Research Sdn Bhd (AllianceDBS Research).

The firm in a report yesterday said the company’s earnings will be supported by the contribution from new property launches.

Sunway is targeting RM1.7 billion of property sales in financial year 2015 (FY15) on the back of RM2 billion worth of launches.

It observed that the key launches will include Mount Sophia, Singapore, (gross development value (GDV) estimated to be worth RM600 million), Citrine@Iskandar Malaysia, Johor (GDV of RM220 million), Sunway Velocity (GDV of RM200 million), Sunway Damansara (GDV of RM200 million) and Sunway South Quay (GDV of RM300 million).

Additionally, AllianceDBS Research said Sunway still owns 3,363 acres (1,361 hectares) of landbank with an estimated GDV worth RM49 billion.

It believes that the development of the landbank will generate more than 15 years of revenue and earnings for Sunway Group.

In the meantime, the research firm said Sunway’s property sales are likely to remain stable as the group has RM2.8 billion worth of unbilled sales which will continue to support its earnings despite the weaker property market currently.

Furthermore, AllianceDBS Research said the company’s prospects will be boosted by the potential spin off of the construction arm which is scheduled to complete an initial public offering (IPO) exercise by June.

The research firm believes that the listing of Sunway’s construction arm could provide a catalyst for Sunway shares as shareholders may have the opportunity to gain from the distribution-in-specie of Sunway Construction shares and special cash dividend under its value-unlocking exercise.

Moreover, AllianceDBS Research noted that Sunway Construction will be granted the first right of refusal for all of Sunway’s construction jobs in the future, thus providing a healthy job workflow ahead.

Apart from that, the research firm observed that Sunway has three investment properties under development.

The research firm believes that the three properties, Sunway Pyramid 3, Sunway University New Academic Block and Sunway Velocity Shopping Mall which will be completed by the end of this year will start to contribute earnings to Sunway Group from FY16 onwards.

AllianceDBS Research noted that with the completion of those properties, Sunway’s investment property portfolio will be worth over RM2.5 billion, giving the possibility of asset injection for Sunway REIT.

Hence, with a strong earnings prospects supported by healthy unbilled sales and construction order book, AllianceDBS Research reiterates its bullish view on Sunway, valuing the company’s share price with a fair value of RM3.80 per share.