- We maintain our HOLD on Sunway, with our fair value cut to RM3.15/share (from RM3.55/share previously), based on a 20% discount (vs. 10% previously) to our SOP value of RM3.95/share.

- The company yesterday announced the acceptance of the second letter of award from Cititower Sdn Bhd, this time worth RM222mil for piling, sub-structure, and associated works (package 2) for the proposed mixed commercial development for Lot 185 and Lot 167(K) at Persiaran KLCC, Kuala Lumpur City Centre.

- The 82-week contract would start upon site possession, which would be determined at a later date. Cititower is a JV company between KLCC (Holdings) Sdn Bhd and QD Asia Pasific Ltd. It had last month secured the first package valued at RM304mil from Cititower for the development of the North East Car Park (NEC), underneath the KLCC Park, and associated works (package 1).

- The latest contract brings the total projects secured YTD to RM1.47bil, including RM1.02bil worth of external orders. Its total order book now amounts to RM5.9bil, with an estimated ~RM4bil still outstanding (3x of FY12 construction revenue). With this, Sunway can easily surpass its new order target and our assumption of RM1.5bil for the year. We maintain our earnings forecasts.

- Sunway has proposed a 1-for-3 renounceable rights issue of up to 594.55mil shares for RM1.70 each, and a 15% ESOS of up to 232.65mil shares. Regardless of other investors’ interest, its major shareholder Tan Sri Jeffrey Cheah and related parties, who collectively hold 639.92mil shares representing 49.5% of Sunway, will subscribe for their rights entitlements for a minimum proceeds totaling RM362.6mil. The maximum proceeds will go up to RM1.01bil.

- We believe this to be an appropriate cash call given its fundamentally-driven growth prospects and vast amount of work ahead, which are underpinned by:- 1) The second coming of Bandar Sunway, in Iskandar Malaysia, 2) Property unbilled sales of RM2.8bil as at 31 Dec 2012, 3) A healthy construction order book of nearly RM6bil, with the outstanding amount at c.RM4bil. 4) Active property investment arm, with contributions from SunREIT.

- Sunway aims to develop nearly 1,770 acres of land in Iskandar Malaysia over a span of 15 years, with a potential GDV of RM30bil. It also has 88 acres of undeveloped landbank in Bukit Lenang, Johor Bahru.

Source: AmeSecurities