Sunrise Bhd

(Jan 11, RM2.17)
Reiterate buy at RM2.20, target price at RM3.30:
We were pleasantly surprised by the respectable response to the much-awaited launch of MK28 condominium. The project, which was soft launched in mid-December 2009, has achieved more than 50% sales booking to date. Average selling price came in at RM780 per sq ft, exceeding our expectation by 30%.

Going forward, Sunrise will focus on converting these sales bookings to firm sales as well as the construction of the main building, with the substructure already completed.

With sales of RM147 million already achieved in 1QFY10 and sales bookings of around RM600 million, mainly from MK28, Sunrise will have no problem achieving our sales projection of RM657 million for FY10. Furthermore, we believe the downtrend in unbilled sales is at an inflection point now with potential to top RM1.4 billion in the next few quarters.

Current unbilled sales stood at RM863.7 million. The expected strong sales for MK28 will underpin earnings visibility for FY10 and FY11. Earnings visibility for FY12 also depends very much on the launch and sale of new projects.
Barring any landbank acquisition, net gearing is expected to decline to a more manageable 0.16 times to 0.26 times over the next three years as cash is collected from the build-then-sell MK16B and the retention sum is released for recently completed MK Banyan and MK Meridin projects.

As buyers normally take three months to formalise sale and purchase agreements, we believe Sunrise will start reporting higher unbilled sales in its 3QFY10 results in May. Higher sales should already start flowing through in February itself when the company releases its 2QFY10 results.

Other potential earning catalysts include the sale of investment properties, acquisition of new landbank, en bloc sale of Solaris Tower and the reinstatement of 35% dividend payout policy, which will see dividend yield increase from 1.7% to 4.8%.

We reiterate our buy call and target price of RM3.30 based on 10 times price/earnings (P/E) to CY10 earnings per share (EPS) realisable net asset value (RNAV) of RM3.44. Trading at just 7.1 times forward P/E, Sunrise’s valuation is undemanding as compared to sector average forward P/E of 13.8 times.

We believe the impending rise in unbilled sales levels coupled with the current buoyant sentiment in the property market will spur investor interest in Sunrise again. — ECM Libra Investment Research, Jan 11

This article appeared in
The Edge Financial Daily, Jan 12, 2010.


SHARE