Sunny days ahead for Sunrise

KUALA LUMPUR: Analysts are upbeat on Sunrise Bhd’s prospects going forward, given its growth strategy to venture into a variety of locations, both foreign and domestic.

A further positive factor is the cyclical nature of the property sector which would help propel sales as the domestic economy picks up pace.

Inter-Pacific Research Sdn Bhd yesterday raised its target price for Sunrise to RM2.52 by ascribing forward price-to-earnings ratio (PER) of eight times and EPS of 31.5 sen.

Sunrise’s shares rose four sen to close at RM2.24 yesterday.

The research house, which is recommending the stock as an outperform, said it is positive over Sunrise in view of the company’s growth strategy to venture into multiple locations.

“Potential re-rating remains strong as much would depend on the potential sales of their ambitious launches of RM6.59 billion spanning over FY June 2011-12.”

Pipeline projects for CY11 comprise of 1) MK 20; 2) Solaris 3; 3) Jelutong JV; 4) Lot 149 (the Angkasaraya-KLCC development); 5) Kajang; and 6) MK 22, it said.

Maybank Investment Bank Bhd Research’s property analyst Wong Wei Sum in a report dated Oct 12 upgraded her call on Sunrise to a buy with a higher target price of RM2.80 (from RM1.98). She said the stunning sales performance achieved in the recently-launched Canada project was a showcase of Sunrise’s ability to expand beyond Mont’Kiara.

Wong said the project raises unbilled sales by 69% and makes Sunrise’s RM1.3 billion FY11 sales target more achievable.

“Unbilled sales could be further lifted by RM480 million office en-bloc sales (from Menara Solaris in downtown Kuala Lumpur), expected to be concluded by end-2010. We raise our forecasts by 5% to 46% and RNAV by 0.9%,” she said.

Wong said Sunrise’s Quintet project in Richmond, Canada, marked a successful start to overseas expansion.

“Phase 1 has been fully sold within a month. Quintet has RM1.2 billion GDV in total (circa RM1,730 psf; size ranging 500 sq ft -1,500 sq ft) and will be developed in two phases.

“Given the strong sales recorded thus far, Sunrise will bring forward Quintet’s Phase 2 launching. In our forecasts, we expect Quintet to contribute 4.3%-28.1% of FY11-13’s earnings before interest and tax,” she said.

Wong upgraded Sunrise’s FY11-13 earnings forecasts by 5% to 46% to factor in changes in Quintet sales assumptions and profit recognition method as well as Menara Solaris GDV. She also expects Ebit contributions from non-Mont’Kiara projects to increase from 4% in FY11 to 42% in FY13.

Wong said Sunrise was trading at an undemanding PER of 7.2 times for 2011 compared with the industry’s 11.3 times average, and a discount of 4.1% and 47% to its NTA and RNAV per share, respectively.

“We believe lower concentration risk and the better-than-expected sales recorded thus far deserves a lower discount. We now value Sunrise at RM2.80 based on a 30% discount to its RNAV of RM4.00 per share, from our earlier value of RM1.98, based on a 50% discount to RNAV of RM3.97 per share,” she said.

BIMB Securities Research in its 2H2010 outlook for Sunrise said that despite bearish sentiment on the high-end luxury apartment segment earlier in the year, the company still had its own niche in the property market.

It said property prices in the Mont’Kiara area had been fairly buoyant despite some downward pressure in other areas particularly in the KLCC area.

“On top of that, we believe the group will move into other areas to reduce the concentration risk,” it said.

BIMB Securities said the domestic property market would ride on the economic recovery’s rapid advancement.

In addition, property demand would continue to be supported by high affordability levels, ample liquidity, low interest rates and wealth creation from the local stock market, it said.

“We are maintaining our buy call on Sunrise with a target price of RM2.39. At our target FY10 price-to-book ratio of 1.1 times, the stock is trading well below the median average and thus still justify our buy call rating on this stock,” it said.

MIDF Research said as at mid-2010, Sunrise’s unbilled sales stood at RM861 million. At a press briefing following its AGM yesterday, Sunrise executive chairman Datuk Tong Kooi Ong revealed that its unbilled sales has since risen to RM1.2 billion, following the successful launch of Quintet.

“There is no let down nonetheless in the pace of new launches with a spate of projects that are planned to be launched during the next 12-15 months, with GDV totalling nearly RM7 billion.

“Among the new launches include 1) Menara Solaris, 2) Solaris 3, 3) MK22, 4) Jelutong-JV (with Sime Darby), and 5) Wisma Angkasaraya redevelopment. These projects will help underpin earnings until at least 2013,’’ he said.

This article appeared in The Edge Financial Daily, October 29, 2010.

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