Snaps up Land in Kelana Jaya
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Construction│Malaysia May 12, 2015 Sunway Bhd FLASH NOTE SWB MK / SWAY.KL Current RM3.40 Market Cap Avg Daily Turnover Free Float Target RM4.04 US$1,650m US$1.83m 33.1% Prev. Target RM4.00 RM5,942m RM6.66m 1,723 m shares Up/Downside 18.8% Conviction| | CIMB Analyst(s) Snaps up land in Kelana Jaya Sunway's deal to acquire a 17-acre piece of land in Kelana Jaya was a positive surprise and we view the RM386 psf (RM286m) price tag as fair given its urban location, proximity to major highways and the new BRT line. The deal will be financed through a mix of borrowings and internal funds. First launch is targeted for 2H16, suggesting full-year earnings contribution only from ———————————————————————————————————————— Sharizan ROSELY 2017 onwards. Hence, we keep our EPS forecasts at this juncture. Based on a T (60) 3 2261 9077 20% pretax margin, we estimate that this venture will contribute RM40m (6%) E [email protected] to FY17 net profit. We raise our RNAV-based target price as we factor in the new land (unchanged 20% RNAV discount) and maintain our Add call. This land purchase and construction job wins are potential catalysts. Share price info What Happened Share price perf. (%) 1M 3M 12M Sunway, through Sunway Dimension Stones Sdn Bhd, is acquiring a new Relative -7.5 1.1 16.6 17-acre land bank in Kelana Jaya for RM286m (RM386 psf) from several Absolute -9.6 1.5 13.3 private parties. Notable landmarks surrounding the land include Sunway Major shareholders % held Resort City, Kelab Golf Negara Subang (KGNS), Giant Hypermarket and Tan Sri Jeffrey Cheah & family 55.4 JP Morgan Chase & Co. 5.8 Paradigm Mall (see site photos overleaf). EPF 5.7 What We Think Show Style "View Doc Map" The plot of land sits in a strategic and mature urban location, which is overall positive for Sunway's land bank expansion within Klang Valley. Its key features include access to four main highways - Federal Highway, LDP, NKVE and NPE - and a 10- to 15-minute distance to the Subang Airport. The land also includes a water retention pond, which will be beautified. On a plot ratio of 4x, the overall development will comprise a mixed development, with seven residential blocks plus a commercial podium. Transport links feature a 600-metre walking distance to the new Sunway Bus Rapid Transit (BRT) line, which provides easy access to Sunway Resort City. The RM1.8bn GDV over five years is based on the group's estimated selling price of RM800 psf. First launch is targeted for 2H16, suggesting earnings contribution only from 2017 onwards. Based on a 20% pretax margin, we estimate that this venture will contribute RM40m (6%) to net profit. What You Should Do Accumulate as the stock continues to offer longer-term value via its land bank. This latest land purchase increases the group's total domestic land bank to 3,380 acres, with an effective total GDV of RM32bn over 15 years. With this deal, the group's total land bank in Klang Valley makes up 24% of its overall land bank and 22% of total incoming GDV. Price Close Relative to FBMKLCI (RHS) Financial Summary 3.80 129.3 Dec-13A Dec-14A Dec-15F Dec-16F Dec-17F Revenue (RMm) 4,721 4,842 4,962 5,029 5,183 3.30 112.7 Operating EBITDA (RMm) 664.4 588.8 479.2 541.2 564.4 Net Profit (RMm) 1,490 743 610 634 653 2.80 96.0 12 10 Core EPS (RM) 0.28 0.34 0.35 0.37 0.38 8 6 Core EPS Growth 31.2% 22.3% 3.0% 4.0% 3.0% 4 2 FD Core P/E (x) 12.62 10.24 9.94 9.40 8.97 Vol m Vol DPS (RM) 0.10 0.11 0.11 0.12 0.13 May-14 Aug-14 Nov-14 Feb-15 Dividend Yield 2.94% 3.24% 3.24% 3.53% 3.82% Source: Bloomberg EV/EBITDA (x) 9.87 11.92 14.12 12.58 11.72 52-week share price range P/FCFE (x) 13.48 50.32 48.38 24.19 20.48 3.40 Net Gearing 31.5% 36.0% 35.0% 36.5% 33.3% 2.98 3.88 P/BV (x) 1.10 0.99 1.02 1.00 0.94 ROE 11.1% 10.5% 10.4% 11.0% 10.8% 4.04 % Change In Core EPS Estimates 0% 0% 0% Current Target CIMB/consensus EPS (x) 1.12 1.15 1.12 SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Sources: CIMB. COMPANY REPORTS Designed by Eight, Powered by EFA Sunway Bhd│Malaysia May 12, 2015 Figure 1: Location of the land along LDP and Federal Highway Figure 2: Site photo SOURCE: COMPANY SOURCE: COMPANY Figure 3: Site photo Figure 4: Key details of the new piece of land SOURCE: COMPANY SOURCE: COMPANY 2 Sunway Bhd│Malaysia May 12, 2015 Figure 5: RNAV Type Location Size/units Area (sq ft) Price Stake Value Completed buildings RM m Sunway Lagoon Theme Park Petaling, Selangor 59.9 ac 728,326 200.0 100% 145.7 Sunway Hotel Georgetown Penang 240.0 units 0 150,000.0 100% 36.0 Monash University Sunway Campus Petaling, Selangor 12.0 ac 754,000 220.0 100% 165.9 Sunway University College Petaling, Selangor 12.4 ac 615,983 220.0 100% 135.5 Sunway Giza Sunway Damansara, Selangor 1.4 ac 98,000 500.0 60% 29.4 Lost World of Tambun Tambun, Perak 39.8 ac 728,326 80.0 65% 37.9 Sunway Hotel Phnom Penh Phnom Penh, Cambodia 138.0 units 125,313 300,000.0 53% 21.7 Sunway Hotel Hanoi Hanoi, Vietnam 142.0 units 9,365 300,000.0 100% 42.6 On going developments Sunway City Penang Seberang Perai, Penang 15.8 ac 210,394.8 100.0 100% 21.0 Sunway Grand Penang 3.8 ac 768,767.9 100.0 100% 76.9 Sg. Ara - new land Penang 68.3 ac 3,484,800.0 13.0 100% 45.3 Bukit Mertajam - new land Penang 17.8 ac 7,729,724.0 12.0 100% 92.8 Sunway Damansara Petaling, Selangor 18.2 ac 1,048,489.2 120.0 60% 75.5 Sunway City Ipoh Ipoh, Perak 899.2 ac 32,666,515.2 3.0 65% 63.7 Sunway Velocity Kuala Lumpur 19.5 ac 984,456.0 150.0 50% 73.8 Sunway Tower KL 1 Kuala Lumpur 1.0 ac 43,560.0 1,000.0 100% 43.6 Sunway Kayangan Bukit Raja, Selangor 5.4 ac 367,646.4 40.0 100% 14.7 Sunway Integrated Resort Petaling, Selangor 18.5 ac 845,064.0 100.0 100% 84.5 Sunway Semenyih Ulu Langat, Selangor 398.1 ac 17,341,671.6 5.0 100% 86.7 Sunway Cheras Selangor 6.9 ac 301,870.8 25.0 100% 7.5 Sunway South Quay Bandar Sunway, Selangor 52.4 ac 2,517,768.0 350.0 60% 528.7 Casa Kiara III Sri Hartamas, KL 2.8 ac 130,680.0 180.0 80% 18.8 Sunway Duta Kuala Lumpur 3.2 ac 136,342.8 350.0 60% 28.6 Sunway Melawati Setapak, KL 30.6 ac 1,427,896.8 35.0 100% 50.0 Sunway Alam Suria Shah Alam, Selangor 14.1 ac 1,045,440.0 40.0 50% 20.9 Sunway OPUS Grand India Hyderabad, India 23.8 ac 1,524,600.0 20.0 50% 15.2 Sunway MAK Signature Residence Hyderabad, India 14.0 ac 609,840.0 20.0 60% 7.3 Sunway Guanghao Jianyin, China 3.7 ac 740,520.0 80.0 39% 23.1 Tianjin Eco City Tianjin, China 90.9 ac 3,789,720.0 92.0 65% 226.6 Wonderland Business Park Sydney, Australia 65.5 ac 3,971,800.8 95.0 31% 117.0 Bukit Lenang - new land Johor 64.0 ac 2,787,840.0 40.0 80% 89.2 Taman Equine Selangor 33.0 ac 1,437,480.0 20.0 100% 28.7 Bangi Selangor 3.0 ac 130,680.0 10.0 100% 1.3 Sg. Long Balakong 111.0 ac 4,835,160.0 25.0 80% 96.7 Mont Putra Selangor 163.0 ac 7,100,280.0 25.0 100% 177.5 Melawati 2 Selangor 2.0 ac 87,120.0 20.0 100% 1.7 Tampines Singapore 5.0 ac 217,800.0 750.0 30% 49.0 Sembawang Singapore 0.8 ac 34,848.0 975.0 100% 34.0 Yuan Ching Road Singapore 5.0 ac 217,800.0 750.0 30% 49.0 Pasir Ris Rise Singapore 4.3 ac 187,308.0 780.0 30% 43.8 Medini land Iskandar 691.0 ac 30,099,960.0 35.0 38% 400.3 Pendas land Iskandar 1,079.2 ac 47,009,952.0 35.0 60% 987.2 New Land Novena Singapore 1.7 ac 71,874.0 500.0 30% 10.8 Penang Land ( 4 plots ) Penang 989.9 ac 43,118,737.2 25.0 100% 1078.0 New land - Kelana Jaya Petaling Jaya 17.0 ac 739,039.0 54.0 100% 39.9 Total value of properties 5,424.2 Market cap Stake Rm m Sunway REIT 4,990.0 37% 1,831.3 FY16 Net profit Stake P/E RM m Construction 104.7 100% 15.0 1,569.9 Quarry & Trading 70.8 100% 12.0 849.5 Property investments (4Q14) 2,029.3 Associates and JCE's 1,508.0 Total borrowings (4Q14) (3,784.4) FD RNAV (RM) 10,147.89 RNAV/share (RM) 5.05 Discount to RNAV 20% Target price (RM) 4.04 SOURCES: CIMB, COMPANY REPORTS 3 Sunway Bhd│Malaysia May 12, 2015 Profit & Loss Balance Sheet (RMm) Dec-14A Dec-15F Dec-16F Dec-17F (RMm) Dec-14A Dec-15F Dec-16F Dec-17F Total Net Revenues 4,842 4,962 5,029 5,183 Total Cash And Equivalents 2,022 2,042 1,842 1,824 Gross Profit 4,842 4,962 5,029 5,183 Total Debtors 1,787 1,769 1,786 1,752 Operating EBITDA 589 479 541 564 Inventories 598 716 726 748 Depreciation And Amortisation (114) (113) (112) (118) Total Other Current Assets 1,772 1,282 1,329 1,386 Operating EBIT 475 366 429 447 Total Current Assets 6,179 5,810 5,684 5,711 Financial Income/(Expense) (30) (65) (43) (20) Fixed Assets 1,047 990 1,011 1,036 Pretax Income/(Loss) from Assoc.