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Got Milk?
Yesterday, Sunway announced that it had won a RM129m job to construct a dairy factory. Our recent meeting with management has reinforced our optimism on Sunway. Potential jobs in the pipeline include more developments from SunCity, airport upgrades, the LCCT building, Kelau Dam, Kuantan treatment plant and some jobs in Putrajaya. We remain bullish on its overseas prospects as well, namely road works in India, Phase 2 of Arzanah and precast supply in Singapore. Sunway remains one of our top sector picks. Maintain BUY, RM2.22 TP.
Got milk? Yesterday it was announced on Bursa that Sunway had won a RM129m job to construct a dairy products factory in Pulau Indah, Port Klang, Selangor. The job was awarded by PLM Dairies SB and is expected to be completed within the next 12 months. Imputed in our projections is a RM1bn p.a orderbook replenishment for FY10-12. Including this recent win, Sunway has YTD bagged six jobs collectively valued at RM602m, making up 60% of its FY10 new jobs win target.
More from sister company? SunCity (NR) has another RM1bn-RM1.5bn worth of contracts to be tendered out within the next 1-2 years. These include the Pyramid mall extension, Sunway office tower (Sunway is currently doing the ground works), Monash University extension, student apartments and Sunway Medical Centre extension. There are also plans to construct a new office tower beside the former Wisma Denmark in KL. The launch of Sunway REIT (NR) would also free up some cash for SunCity to embark on more development projects, which could eventually benefit Sunway.
Expect more domestically. On the domestic front, Sunway has RM10bn in target tenders (a 50:50 mix between private and Govt jobs). Some of these jobs are the Penang and Ipoh airport upgrades (RM300m), Kelau Dam (RM200-250m), Kuantan treatment plant and some jobs in Putrajaya. We also understand that Sunway has submitted the lowest bid for the LCCT building (RM750-850m) on a design and build basis. We understand that there are only 3-4 contractors remaining.
Bullish overseas. Sunway has submitted RM1.3bn worth of bids for road works in India and will be tendering for more when they open up (likely very soon). In the Middle East, work on Phase 1 of Arzanah is on track and is now > 30% complete. We gather that tenders for Phase 2 should be out early next year and expect Sunway to stand a decent winning chance given its preferred contractor status with the developer. In Singapore, management expects more contracts for the supply of its precast concrete structures. Its plant is currently 70%-80% utilized and should be able to accommodate higher demand.
VALUATION & RECOMMENDATION
Maintain BUY, RM2.22 TP. Our recent meeting with management has reinforced our optimism on Sunway. Yesterday’s RM129m job win further supports our view that contract flows will be strong. As YTD job wins are still within our RM1bn orderbook replenishment target, we make no changes to our estimates. Our RM2.22 TP is based on 12x partially diluted FY10 EPS. We have a 3-year CAGRf of 31.7%. Management has guided that it may introduce a dividend policy with a 20%-25% payout vs our current assumption of 10%. Foreign shareholding now stands at 8% vs the 17%-18% peak in 2007. Along with Mudajaya (BUY, TP: RM7.33), Sunway remains one of our top sector picks.
Yesterday, Sunway announced that it had won a RM129m job to construct a dairy factory. Our recent meeting with management has reinforced our optimism on Sunway. Potential jobs in the pipeline include more developments from SunCity, airport upgrades, the LCCT building, Kelau Dam, Kuantan treatment plant and some jobs in Putrajaya. We remain bullish on its overseas prospects as well, namely road works in India, Phase 2 of Arzanah and precast supply in Singapore. Sunway remains one of our top sector picks. Maintain BUY, RM2.22 TP.
Got milk? Yesterday it was announced on Bursa that Sunway had won a RM129m job to construct a dairy products factory in Pulau Indah, Port Klang, Selangor. The job was awarded by PLM Dairies SB and is expected to be completed within the next 12 months. Imputed in our projections is a RM1bn p.a orderbook replenishment for FY10-12. Including this recent win, Sunway has YTD bagged six jobs collectively valued at RM602m, making up 60% of its FY10 new jobs win target.
More from sister company? SunCity (NR) has another RM1bn-RM1.5bn worth of contracts to be tendered out within the next 1-2 years. These include the Pyramid mall extension, Sunway office tower (Sunway is currently doing the ground works), Monash University extension, student apartments and Sunway Medical Centre extension. There are also plans to construct a new office tower beside the former Wisma Denmark in KL. The launch of Sunway REIT (NR) would also free up some cash for SunCity to embark on more development projects, which could eventually benefit Sunway.
Expect more domestically. On the domestic front, Sunway has RM10bn in target tenders (a 50:50 mix between private and Govt jobs). Some of these jobs are the Penang and Ipoh airport upgrades (RM300m), Kelau Dam (RM200-250m), Kuantan treatment plant and some jobs in Putrajaya. We also understand that Sunway has submitted the lowest bid for the LCCT building (RM750-850m) on a design and build basis. We understand that there are only 3-4 contractors remaining.
Bullish overseas. Sunway has submitted RM1.3bn worth of bids for road works in India and will be tendering for more when they open up (likely very soon). In the Middle East, work on Phase 1 of Arzanah is on track and is now > 30% complete. We gather that tenders for Phase 2 should be out early next year and expect Sunway to stand a decent winning chance given its preferred contractor status with the developer. In Singapore, management expects more contracts for the supply of its precast concrete structures. Its plant is currently 70%-80% utilized and should be able to accommodate higher demand.
VALUATION & RECOMMENDATION
Maintain BUY, RM2.22 TP. Our recent meeting with management has reinforced our optimism on Sunway. Yesterday’s RM129m job win further supports our view that contract flows will be strong. As YTD job wins are still within our RM1bn orderbook replenishment target, we make no changes to our estimates. Our RM2.22 TP is based on 12x partially diluted FY10 EPS. We have a 3-year CAGRf of 31.7%. Management has guided that it may introduce a dividend policy with a 20%-25% payout vs our current assumption of 10%. Foreign shareholding now stands at 8% vs the 17%-18% peak in 2007. Along with Mudajaya (BUY, TP: RM7.33), Sunway remains one of our top sector picks.
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