HDBSVR: Buy Sunway Holdings at RM1.49, TP RM1.95

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) has a Buy call on Sunway Holdings with a sum-of-parts target price of RM1.95

Sunway had on Thursday, April 1 accepted the letter of award for a RM88 million contract from KLCC Holding Sdn Bhd to build Phase 2 of Impiana KLCC Development.

This is an extension to the existing hotel wings comprising an additional three-storey car park podium and 22-storey tower block above the existing four- storey car park podium on Jalan Pinang, Kuala Lumpur

The contract is targeted to be fully completed on Nov 2, 2011 with a sectional completion of a link bridge within 43 weeks from the commencement date.

“This is Sunway’s second contract win for 2010 bringing YTD contract wins to RM110 million. This forms c.14% of our RM800m order win assumption for FY10 and will lift Sunway’s orderbook by 4% to RM2.5 billion,” said HDBSVR in a research note on Friday.

Assuming a margin of 8%, total pre-tax profit over the duration of the contract amounts to RM7 million or 1% and 3% of FY10 and FY11 core pretax profit, it said.

“We continue to like Sunway as a small-mid cap pick to the sector. Earnings deliverance has been consistent while other key catalysts are a revival in India infrastructure contracts and the 10MP which would provide more clarity on contract flows,” it said.