Kenanga Research starts coverage on Sunway, target price RM3.08

by **Cals** Thu 21 Nov 2013, 17:56

Business & Markets 2013

Written by theedgemalaysia.com

Thursday, 21 November 2013 09:44

KUALA LUMPUR (Nov 21): Kenanga Research has initiated coverage on Sunway Bhd at RM2.74 with an Outperform rating and target price RM3.08 and said the target price valuation was at a 25% discount to the property sector which was inline with its industry average of 27%.

In a note Thursday, the research house said it liked SUNWAY for: (i) its cheap landbanks, (ii) low sales base compared to other large cap developers, (iii) has the second largest exposure to Iskandar region where we have a bullish outlook, (iv) the third largest market capitalisation developer with strong branding and experience and a full value chain from construction, property development to investment properties, (v) one of the top contractors with an outstanding order book of RM3.9 billion, (vi) company’s plan to spin off more assets to SUNREIT, the third largest retail-based MREIT in town by market cap, in three-years time, and (vii) undemanding valuation of 10.7x-8.7x and 1.0x-0.9x for its FY13-15E PER and PBV vs. the industry average of 14.6x-12.4x and 1.4x, respectively.

Kenanga Research said it was forecasting FY13E, FY14E, and 15E core earnings of RM440 million, RM495 million and RM543 million respectively, driven by: (i) FY13E-15E construction order book replenishments of RM1.5 billion-RM2.0 billion, (ii) FY13E-15E property sales of RM1.3 billion-RM2.5 billion, and (iii) recurring income from investment properties, REIT, trading & manufacturing and quarry.

“The risks to our estimates are weaker property demand, construction order book replenishments, negative regulations and project financing issues,” it said.