SUNWAY (5211) - Sunway: The listing of SunCon
I roughly read through it and some of the key points are below
Barring any unforeseen circumstances, the listing of SunCon will be around mid July. So 3-4 months later.
There are 2 scenarios mentioned in the announcement, namely minimum and maximum which depends on the possibility of share buy back exercise, ESOS options and conversion of warrants which affected the no. of ordinary shares of Sunway group.
The final retail price and institutional price are expected to be announced within 2 market days from the price determination date.
Since majority of the proceeds raised will distribute back to Sunway's shareholders as special dividends, I guess the amount will be the focus of the shareholders.
Based on the latest 4th quarter report of Sunway group, the no. of ordinary shares is 1.727 million.
Thus, dividing the amount by the outstanding shares gives 24.7 cents and 21.87 cents as special dividends respectively for minimum and maximum scenario. There will be slight deviation as a result of conversion of warrants and ESOS as well as share buy back by the group if any.
Bear in mind after the exercise, the equity interest of the group in SCG will be diluted to 51% from existing 100%.
Based on the latest
4th quarter result of Sunway group, the construction division
contributed RM1.75 billion revenue and RM113 million net profit to the
group. So after the exercise, it will roughly cut into half for the
profit attributed to the Sunway's shareholders contributed from the
construction division.
Apart from the distribution, the group also attached the financial report of SunCon group.
For the audited
eight months period ended August 2014, the group made around RM60
million net profit, giving it 22% and 5.2% gross profit margin and net
profit margin respectively.
Administrative expenses made a lot out of the operating profit
At the balance
sheet, the group was at net cash position. One thing to note is the
trade receivables was quite high. It's normal the construction industry
usually have higher trade receivables. But given much of its contracts
come from its mother, Sunway group, hopefully it will not post any
problem to its cash flow
As at Dec 2014, SCG group has an outstanding order book of approximately RM3 billion
Operating cash flow was at negative territory at 8-month period ended Aug 2014.
Take a look at the segment reporting will give you some slight idea on what to look for.
The construction
division only reported a mere 1.17% net profit margin compared to 23%
for its precast concrete division. The earning quality for its
construction division is just not too good for me.
I would expect the
construction division would fare better since they perform piling works
themselves rather than giving out to other players like Pintaras or
Ecopile.
The net profit
contribution from precast concrete to SCG group is hopping 75%. So, the
performance of SCG group is highly depends on its precast concrete
division. That why I also like OKA Corp who is also involved in precast
concrete business.
But one thing need
to take note is the precast concrete division is highly depends on its
plant in Singapore and it supplies primarily for the HDB public housing
projects and some private sector development projects. With the slow
down of development of HDB projects in Singapore, I think the division
will have a hard time moving forward.
Bear in mind that the utilisation rate never reach 80% before as stated for the past few years.
So, probably I will consider to sell SunCon off after its listing, no intention to hold long.
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