SUNWAY (5211) - Sunway Bhd - Good news piling up
Target RM4.00 (Stock Rating: ADD)
Guidance of a flattish property sales target of RM1.7bn for FY15 is understandable given the "cooling off" of domestic property demand, vis-a-vis the pre-GST/post-GST effect. Its commendable property pretax margins of 30% should be sustainable, supported by its product mix in Iskandar and its focus on landed units vs. high-rise. We believe a 50% growth in construction order book to c.RM4bn for the IPO-bound SunCon is achievable by end 2015, though higher than most of the major contractors. Post-IPO special dividends of 20-30sen per share for Sunway Berhad shareholders remain intact. We retain our EPS forecasts and target price, pegged to an unchanged 20% RNAV discount. Maintain Add. Job wins and special dividends are key catalysts.
What Happened
Key takeaways from our checks with management: 1) The group aims to achieve RM1.7bn total property sales for FY15, relatively unchanged from FY14's figure. 2) Plans to landbank remain on the cards but it is now more focused on the Klang Valley and less keen on the southern region. 3) Construction order book stood at RM3bn as at end-FY14, driven by total replenishments of RM1.1bn worth of domestic contracts. 4) Order book drivers in 2015 continue to be more building-works focused, with targeted total wins of up to RM2bn. 5) The listing of pure-construction arm Sunway Construction is set towards end of 2Q15 or early July-15. 6) Special dividend spin-off to Sunway Berhad's shareholders post-SunCon's IPO should be realised in 2H15.
What We Think
Indications of a flattish property sales target of RM1.7bn were not too surprising and arguably resilient in view of the challenging outlook. This will mainly be driven by its property ventures in the Klang Valley and its landed units segment in Iskandar, which is doing much better than other high-rise launches there, and comprises 15% of the RM2bn worth of upcoming launches this year. We believe the group's RM1.5bn-2bn construction target in 2015 is within reach, higher than last year's RM1.1bn wins. This should bump up its outstanding order book by at least 50% to over RM4bn before year-end and should sustain the 6-7% construction pretax margins over the next two years.
What You Should Do
Potential catalysts in the months ahead continue to be mainly construction-focused. This should mitigate the softer property market outlook. Another appealing point is the potential 6-9% special dividend yield. (See charts below for key operating indicators).
Source: CIMB Daybreak - 12 March 2015
Target RM4.00 (Stock Rating: ADD)
Guidance of a flattish property sales target of RM1.7bn for FY15 is understandable given the "cooling off" of domestic property demand, vis-a-vis the pre-GST/post-GST effect. Its commendable property pretax margins of 30% should be sustainable, supported by its product mix in Iskandar and its focus on landed units vs. high-rise. We believe a 50% growth in construction order book to c.RM4bn for the IPO-bound SunCon is achievable by end 2015, though higher than most of the major contractors. Post-IPO special dividends of 20-30sen per share for Sunway Berhad shareholders remain intact. We retain our EPS forecasts and target price, pegged to an unchanged 20% RNAV discount. Maintain Add. Job wins and special dividends are key catalysts.
What Happened
Key takeaways from our checks with management: 1) The group aims to achieve RM1.7bn total property sales for FY15, relatively unchanged from FY14's figure. 2) Plans to landbank remain on the cards but it is now more focused on the Klang Valley and less keen on the southern region. 3) Construction order book stood at RM3bn as at end-FY14, driven by total replenishments of RM1.1bn worth of domestic contracts. 4) Order book drivers in 2015 continue to be more building-works focused, with targeted total wins of up to RM2bn. 5) The listing of pure-construction arm Sunway Construction is set towards end of 2Q15 or early July-15. 6) Special dividend spin-off to Sunway Berhad's shareholders post-SunCon's IPO should be realised in 2H15.
What We Think
Indications of a flattish property sales target of RM1.7bn were not too surprising and arguably resilient in view of the challenging outlook. This will mainly be driven by its property ventures in the Klang Valley and its landed units segment in Iskandar, which is doing much better than other high-rise launches there, and comprises 15% of the RM2bn worth of upcoming launches this year. We believe the group's RM1.5bn-2bn construction target in 2015 is within reach, higher than last year's RM1.1bn wins. This should bump up its outstanding order book by at least 50% to over RM4bn before year-end and should sustain the 6-7% construction pretax margins over the next two years.
What You Should Do
Potential catalysts in the months ahead continue to be mainly construction-focused. This should mitigate the softer property market outlook. Another appealing point is the potential 6-9% special dividend yield. (See charts below for key operating indicators).
Source: CIMB Daybreak - 12 March 2015
