Positive share price momentum
Boom in semiconductor industry growth a boon
Huge undervalued landbanks
Potential goldmine in Sunshine Tower slated for completion in 2019
Initiate BUY with a TP of RM4.75 based on sum-of-parts discounted free cash flow valuation of cash generating units of the Group plus landbank value
Positive share price momentum. Suiwah's share price ascended by 11%, from RM2.66 to RM2.94 in the past month. Trading volumes in the share recorded highest VWAP over 20 days, 60 days and 180 days. The looming financial results for 4Q with anticipation of dividend declaration is one possibility for the increase in share price and trading volume.
Boom in semiconductor industry growth a boon. Qdos Flexcircuits Sdn Bhd, a subsidiary of Suiwah is involved in design, manufacturing and assembly of a range of flexible circuit boards (single sided flex, double sided flex, multi-layer flex, rigid flex, flex assembly and special flex). Semiconductor industry experts Gartner and Technavio estimates the global printed ciruit board market to grow at a CAGR of a high range of 9.5% by 2020. Since this market is an integral part of the mobiles and smartphones market, the recent increase in demand for smart devices will lead to the augmented demand for rigid printed circuit boards (PCB) during the forecast period. Furthermore, factors like the advent of advanced technologies, such as Internet-of-Things (IoT) and wearables (smart watches and smart eyewear), will help to foster the demand for PCB during the predicted period. In terms of geography, the APAC region will account for a market share of more than 85% by 2020.
Huge undervalued landbanks. Book value of RM150mil of property, plant and equipment in addition of RM78mil of fully depreciated property, plant and equipment. Included in the book values comprise of value of land and buildings that cover 86% of total book value of property, plant and equipment. Land at cost of RM128mil includes the book value of prime development land for Sunshine Tower of a mere RM27mil. Fair valuation of all other prime lands for Supermarket, factory and warehouse are worth RM4 per share alone, which we have not imputed in our TP, due to time horizon of unlocking the value.
Potential goldmine in Sunshine Tower slated for completion in 2019 with a GDV of RM1bil. Sunshine development is a mixed development project that includes hotel, school, terrace houses, shopping malls. The crown jewel of the project is Sunshine Tower, which had over subscription of take ups. The rent-out Tower will provide the company with strong recurring earnings visibilty from 2019 and beyond.
Initiate BUY with a TP of RM4.75 based on sum-of-parts discounted free cash flow valuation of cash generating units of the Group plus landbank value taking into consideration Sunshine's retail business, semiconductor business and unlocking of Sunshine development landbank value for Sunshine development project. We have not imputed the development value of the Sunshine development, based on our estimates to be an additional RM3/share. Risks include lower retail sales growth, sharp reversal in semiconductor sales, delay in Sunshine development project.
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