PP 7767/09/2010(025354)

RHB Research
Corporate Highlights
Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

N ew s Updat e
2 September 2010
MARKET DATELINE

Sunway Holdings Share Price

Fair Value
:
:
RM1.58
RM2.35
Secures A RM70m Putrajaya Infrastructure Contract Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (SUNWAY; Code: 4308) Bloomberg: SGW MK

Turn- Net FD Net
FYE over Profit EPS# Growth PER EPS# C.EPS P/CF P/NTA ROE Gearing GDY
Dec (RMm) (RMm (sen) (%) (x) (sen) (sen) (x) (x) (%) (%) (%)
2009** 2,589.9 109.3 13.6 (27.0) 11.6 - - 9.8 1.5 9.5 0.6 1.4
2010f 2,519.8 137.1 22.8 67.9 6.9 17.9 20.0 12.8 1.2 15.1 0.5 1.8
2011f 2,519.2 151.1 25.2 10.2 6.3 19.5 23.0 15.9 1.0 14.3 0.4 1.8
2012f 2,960.0 170.1 28.3 12.5 5.6 21.8 25.0 12.9 0.9 13.9 0.3 1.8
Main Market Listing /Non-Trustee Stock / Syariah-Approved Stock By The SC #Excluding EI * Consensus Based On IBES
**18M ^Annualised

Issued Capital (m shares) 602.0

Market Cap (RMm) 951.2
♦ Another contract. Sunway has secured a RM69.9m contract from
Daily Trading Vol (m shs) 0.8
Putrajaya Holdings for roadworks, drainage, utilities, landscaping works and
52wk Price Range (RM) 1.17-1.66
engineering, procurement, construction & commissioning (EPCC) of chilled
Major Shareholders: (%)
water storage tank, plant building and other associated works for the Gas Tan Sri Jeffrey Cheah 43.3
District Cooling Plant 4 in Putrajaya. The latest contract has boosted
Sunway’s YTD new contracts secured to RM607m (see Table 2) and its
outstanding construction orderbook by 3.5% to RM2.1bn (see Table 3).
Assuming an EBIT margin of 7-8%, the contract will fetch a total EBIT of FYE Dec FY10 FY11 FY12
RM4.9-5.6m over the construction period ending Nov 2011 – Feb 2012. We EPS Revision (%) - - -
Var to Cons (%) +14 +9 +13
are positive on the latest development.

♦ Forecasts. No change in our earnings forecasts that already assume

PE Band Chart

Sunway to secure RM1.5bn worth of new jobs in FY12/10.

PER = 13x
PER = 10x
♦ Risks to our view. The risks include: (1) New contracts secured in PER = 7x
PER = 4x
FY12/10-12 coming in below our target of RM1.5bn per annum; and (2)
Rising input costs.

♦ Maintain Outperform. We are upbeat on the construction sector as we

foresee construction stocks to generally outperform the market in 2H2010,
buoyed by news flow, particularly, from: (1) The RM36bn KL MRT project;
(2) The RM7bn Ampang and Kelana Jaya LRT line extension project; and (3) Relative Performance To FBM KLCI
Federal land deals. Sunway has been pre-qualified to bid for the LRT line
extension project as main contractor as well as segmental box girder sub-
contractor. Also, additional kickers will come from Sunway’s expected firm FBM KLCI
construction margins over the next few quarters thanks to strong
contributions from the high-margin pre-cast concrete components contract in
Singapore and Rihan Heights project of the Arzanah Development in Abu Sunway Holdings
Dhabi, UAE. Also, Sunway’s property profits will be strong driven by
boutique developments in Malaysia and high-rise residential projects in
Singapore. Indicative fair value is RM2.35 based on 12x fully-diluted
FY12/11 EPS of 19.5sen, line with our benchmark 1-year forward target PER
for the construction sector of 10-16x.

Joshua CY Ng
(603) 92802151
Please read important disclosures at the end of this report. joshuang@rhb.com.my

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Table 2: New Jobs Secured YTD
When Job Client Value
(RMm)
Feb 2010 Residential units/TNB sub-station, Shah Alam SunCity 22
Apr 2010 Impiana Hotel, KLCC Private 88
May 2010 Sunway Office Tower (substructure) SunCity 88
May 2010 Sunway Velocity (shop-offices & apartments) SunCity 210
Jun 2010 Dairy product factory in Klang, Selangor Private 129
Aug 2010 Infrastructure in Putrajaya Public 70
Total 607
Source: Company

Table 3: Outstanding Construction Orderbook

Project Outstanding Works
(RMm)
Overseas
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (excluding M&E and stone & tiling works) 389^
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (M&E) 187*
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (stone & tiling works) 43#
Pre-cast concrete components in Singapore 255
Al Reem Island, Abu Dhabi 89
Road projects in India 46
Total 1,009

Local
Government office in Putrajaya 250
Sunway Velocity (shop-offices & apartments) 207
Hotel and office in Putrajaya 137
Dairy product factory in Klang, Selangor 129
Sunway office tower (substructure) 88
Impiana KLCC (Phase 2) 84
Infrastructure in Putrajaya 70
Others 105
Total 1,070

Grand Total 2,079

^60% share of RM649m *75.1% share of RM249m #70% of RM62m
Source: Company, RHBRI

Table 4: Earnings Forecasts Table 5: Forecast Assumptions

FYE Dec (RMm) FY09a* FY10F FY11F FY12F FYE Dec FY10F FY11F FY11F

Turnover 2,589.9 2,519.8 2,519.2 2,960.0 Construction EBIT margin (%) 8.6 7.5 6.8
Turnover growth (%) -5.3 45.9 0.0 17.5 New orderbook secured (RMm) 1,500 1,500 1,500

EBITDA 178.8 248.7 240.4 261.4

EBITDA margin (%) 6.9 9.9 9.5 8.8

Depreciation -43.0 -45.1 -47.4 -49.8

Net Interest -54.0 -28.4 -26.7 -25.0
Associates 72.2 38.3 58.0 58.0
EI 0.0 0.0 0.0 0.0

Pretax Profit 153.9 213.5 224.3 244.6

Tax -33.9 -44.7 -50.8 -57.7
PAT 120.1 168.9 173.5 187.0
Minorities -10.8 -31.7 -22.3 -16.9
Net Profit 109.3 137.1 151.1 170.1
*18M ^Annualised
Source: Company data, RHBRI estimates

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IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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