SUNWAY (5211) - Sunway to acquire premium wholesale hardware firms
April 13, 2015 : 10:29 AM MYT
Sunway Bhd
(April 10, RM3.76)
Maintain buy with a target price (TP) of RM3.76: Sunway is proposing to acquire Winstar Trading Sdn Bhd (Winstar) and PND Hardware & Trading Pte Ltd (PND) for RM130.9 million and S$2.6 million (RM6.96 million), respectively.
The acquisitions will be completed in three tranches whereby Sunway will first acquire a 60% stake, expected to be completed by the second quarter of 2015 (2Q15) in the companies, followed by an additional 20% stake each by 2Q17 and 2Q18.
There is a profit guarantee for financial years 2015 (FY15) to FY17 of RM15 million per annum and S$250,000 per annum for Winstar and PND, respectively, implying good prospects for the hardware trading business.
This translates into 8.7 times price-earnings ratio (PER) for Winstar and 10.4 times for PND. Given that both companies are market leaders with over 30 years of experience in the wholesale hardware market with extensive distribution networks and customer bases, the acquisitions will complement Sunway’s trading and manufacturing division.
We maintain our earnings forecast for now as Sunway’s 60% stake in Winstar and PND will only increase our FY16 earnings by 1.6%.
The listing of Sunway Construction Group Bhd by June this year remains the next re-rating catalyst for the group, given the potential 9% yield (special cash dividend and free Sunway Construction shares).
Nevertheless, our rating is under review as the share price has rallied 14% since our last update in February, and is now close to our TP. — Alliance DBS Research Sdn Bhd, April 10
http://www.theedgemarkets.com
April 13, 2015 : 10:29 AM MYT
Sunway Bhd
(April 10, RM3.76)
Maintain buy with a target price (TP) of RM3.76: Sunway is proposing to acquire Winstar Trading Sdn Bhd (Winstar) and PND Hardware & Trading Pte Ltd (PND) for RM130.9 million and S$2.6 million (RM6.96 million), respectively.
The acquisitions will be completed in three tranches whereby Sunway will first acquire a 60% stake, expected to be completed by the second quarter of 2015 (2Q15) in the companies, followed by an additional 20% stake each by 2Q17 and 2Q18.
There is a profit guarantee for financial years 2015 (FY15) to FY17 of RM15 million per annum and S$250,000 per annum for Winstar and PND, respectively, implying good prospects for the hardware trading business.
This translates into 8.7 times price-earnings ratio (PER) for Winstar and 10.4 times for PND. Given that both companies are market leaders with over 30 years of experience in the wholesale hardware market with extensive distribution networks and customer bases, the acquisitions will complement Sunway’s trading and manufacturing division.
We maintain our earnings forecast for now as Sunway’s 60% stake in Winstar and PND will only increase our FY16 earnings by 1.6%.
The listing of Sunway Construction Group Bhd by June this year remains the next re-rating catalyst for the group, given the potential 9% yield (special cash dividend and free Sunway Construction shares).
Nevertheless, our rating is under review as the share price has rallied 14% since our last update in February, and is now close to our TP. — Alliance DBS Research Sdn Bhd, April 10
http://www.theedgemarkets.com
