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Sunway Holding - Company Update

Sunway Holdings

Another land acquisition

Acquired 33.4 acres land in Taman Equine
Sunway Holdings announced yesterday the acquisition of 33.37 acres of leasehold land in Taman Equine, Selangor from Equine Capital for RM37.8m or RM26 psf which will be paid progressively over the development period (figure 1). The land is located close to the mature townships of Puchong, Bandar Sunway and Petaling Jaya and easily accessible via Lebuhraya Damansara-Puchong (LDP) and Maju Expressway (MEX). Other notable amenities nearby include a premier international school, Alice Smith, Universiti Putra Malaysia and various hypermarkets including Giant and Jusco. The land acquisition is conditional upon, among others, procurement of development order and building plan as well as conversion of land use from agricultural to residential.

High-end residential project of RM250m in the works
The company plans to launch a high-end residential project comprising semi-detached houses and bungalows with GDV of RM250m. Indicative pricing is around RM1.2m to RM2m per unit. The project is targeted to be launched by 1Q 2011 and will be developed over 3 financial years (FY2011 – FY2013). Assuming pretax margin of 20%, this project will contribute RM37.5m net earnings over the development period.

Improving earnings visibility
This is the third land secured YTD which have added 148.7 acres and GDV of RM870 to existing landbank. Remaining GDV now stands at RM3.4bn and management is expected to continue adding more landbank to capitalise on buoyant property market. Earnings visibility from property projects has been enhanced and our earnings estimate for FY11 and FY12 have been upgraded by 1.9% and 15.6% respectively.

Reiterate BUY call
Sunway is our top BUY for the construction sector. This is premise on (1) strong earnings growth of 47.1% in FY10, (2) undemanding forward P/E valuation of 7.7x, (3) more landbank acquisition in the pipeline, and (4) strength in securing overseas construction contracts, in particular in Abu Dhabi and India. Although our target price is unchanged at RM2.00 which is derived from 10x P/E on FY10 EPS, sum-of-parts valuation has been upgraded from RM2.67 to RM2.74.

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