KUALA LUMPUR (Sep 22): Sunway Bhd shares were among the most active this morning following announcements last Friday that the conglomerate intends to list its construction arm via Sunway Construction Group Bhd (SCG).
At 10:30 am, shares of Sunway rose 13 sen or 4% to RM3.44 per share with 643,600 shares traded.
Meanwhile, analysts are optimistic on the company’s recent proposal to list SCG.
Property analyst Loong Kok Wen of RHB Research valued the new listing to be worth about RM1.21 per share.
“Assuming a 13 times P/E on estimated PATAMI of RM120 million (management expects 2H earnings to be stronger), SCG could potentially be worth RM1.56 billion, which translates into RM1.21/share,” he said.
Loong also estimates about 35% of the proceeds will be paid out as special cash dividends.
“As management emphasises that allocation of proceeds for working capital purpose is limited and gearing for SCG will be minimal, about 35% of the proceeds will be paid out as special cash dividend. This works out to be about 25 sen-30 sen/share,” he said.
He reiterates Sunway as his top pick for the property sector with a “buy” rating on a revised fair value of RM3.90 from RM3.60 per share.
Another analyst Isaac Chow of Affin Hwang Investment Bank Bhd sees keen investor demand for SCG shares.
“With over RM130 billion in economic transformation programme jobs still to be awarded, prospects look excellent for significant construction orderbook enhancement for key contractors; and Sunway has strong execution track record in both civil and infrastructure related works,” says Chow.
Chow reaffirms his “add” rating on the stock and raises his target price of the share to RM3.60 from RM3.50 per share.
“We now value the group’s construction business at 14 times CY15E PER (vs 12 times previously) while maintaining a 30% discount to realisable net asset value for its other businesses,” he said.
Property analyst Quah He Wei of AllianceDBS Research echoes other analysts bullish outlook on the stock citing the robust outlook for SCG.
“SunCon’s order book remains strong at RM3.4billion (1.8 times of FY14F construction revenue). While it has only secured RM581million new wins year-to-date, management is confident of achieving its FY14 order book replenishment target of RM2.5 billion, implying major order wins within the next two months,” said Quah.
Quah maintains his “buy” call on Sunway Bhd with an unchanged TP of RM3.90 per share.
“Sunway is currently trading at 10 times FY15F earnings per share, which is unjustified in our view given its superior ‘build-own-operate’ model which is unrivalled by most of its peers,” he said.