Sunway’s share price not reflective of fundamentals

KUALA LUMPUR: The share price of the new entity Sunway Bhd fell 11% to RM2.49 on its maiden day of trading yesterday, which analysts attribute to poor market conditions rather than its underlying fundamentals.

The property and construction company’s shares opened at RM2.60 with 123,900 shares traded, compared with a reference price of RM2.80. The stock then fell to a low of

RM2.40 before closing at RM2.49 with 10 million shares traded.

“The selldown in its share price did not reflect the fundamentals of the company,” a HwangDBS analyst told The Edge Financial Daily.

Trading in Sunway Holdings Bhd and Sunway City Bhd was suspended in July to prepare both companies for the merger. Between the date the shares were suspended and yesterday’s relisting, both companies’ shares were frozen amid high levels of market volatility caused by the US and European debt crisis and the US credit downgrade.

The analyst said Sunway’s share price performance yesterday reflected an “adjustment” to reflect the current market conditions, rather than a view of the merger exercise or the company’s fundamentals, which they are positive on.

“Fund managers were sitting on quite a decent profit before the shares were suspended with no way to sell,” he added.

Cheah: We are quite
happy with our price
at the moment given
the circumstances.

Sunway group chairman Tan Sri Jeffrey Cheah told a news conference that the share price reflects the current global conditions.

“The share price reflects the global situation. We are quite happy with our price at the moment given the circumstances. We are not too worried about the market going up or down,” said Cheah.

Sunway Bhd is the result of a merger between construction-based Sunway Holdings and Sunway City, a leading player in property development and investments.
During the press conference after the stock’s debut on Bursa Malaysia, Cheah said part of the merger’s objective was to unlock synergistic benefits as well as consolidate efforts

between the group’s two public listed companies.

The property and construction arms will create more value through higher efficiency and cost reduction, he said, particularly with the increased use of technology and economies of scale.

Cheah said the group’s overseas business currently accounts for 10% to 15% of the group’s revenue. Now, with a much larger entity, he would like the overseas  proportion to increase.

“I think over the next five years the objective is to have 30% of our turnover derived from our overseas investments. In line with that objective, the group has set aside about RM300 million to RM400 million for our overseas expansion,” he said.

Cheah is optimistic on expanding Sunway’s overseas presence in China.

“Besides China, Singapore is a very important market for the Sunway group in terms of property development and construction contracts. India is also one area that we have a footprint in, but at this juncture, it is relatively small,” he said.

Through the merger, the new entity will acquire total assets worth RM7 billion with a landbank for development of close to 890ha with a gross development value of RM23 billion.
The company had a market capitalisation of RM3.22 billion at yesterday’s closing price.

The merger marks another feather in Cheah’s cap, whose Sunway group was set up as a small tin mining company in the 1970s and later gained prominence when it transformed former mining land into the thriving 350ha Bandar Sunway township.

Now with the capability to bid for bigger tenders, command higher investor interest and borrow at lower cost, the group is in a good position for bigger projects.
“We are always on the lookout for bigger projects. Of course we have tenders in the pipeline. We have tendered for a lot of projects, but until we secure [them], we can’t say too much about it,” said Cheah.

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