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Sunway Holdings (Maybank IB) buy; target price RM2.10

Order book building up nicely

Maintain Buy. Two newly secured construction contracts worth a total of RM154m has lifted Sunway’s outstanding order book to RM2.92b. We remain upbeat on further order book replenishment, both within the Sunway Group and external parties. Sunway is participating in the bids for a number of infrastructure jobs in the Klang Valley which are at various stages of pre-award. Buy with a RM2.10 TP (9x 2011 PER).

Two jobs worth RM154m. Sunway Holdings’ construction units have secured two jobs for the: (i) construction of a 24-storey office tower with a 6-storey basement car park at Bandar Sunway, from sister company Sunway City (RM88m), (ii) installation of stones and tiling works for the Rihan Heights project in Abu Dhabi, UAE, from Silver Coast - Sunway Innopave Joint Venture (AED74.5m or RM65.7m). The office tower is targeted to be completed in Nov ‘11 (18 months construction period), while the sub-contract work at Rihan Heights has a Mar ’11 deadline.

Positive order book replenishment. These new contracts have lifted Sunway’s job wins for this year to RM263m. Earlier wins this year were for the construction of 100 units of cluster homes at Shah Alam from Sunway City (RM21.5m) and the Impiana KLCC Phase 2 from Heritage Lane (RM88m). We estimate that Sunway’s outstanding construction order book should stand at RM2.92b now vs. RM2.77b as at Apr ‘09.

No change to forecasts. Assuming an 8% gross margin, we estimate that these new two contracts would deliver a total net profit of RM9m (1.5sen EPS) to be substantially recognised in 2010, with the balance in 2011. We are maintaining our forecasts as we have incorporated RM1b worth of job wins for 2010 into our earnings model.
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