- We maintain our Hold on Sunway with a fair value of RM3.05/share, based on a 5% discount to our SOP value of RM3.21/share.

- The company announced yesterday that its one-for-three renounceable rights issue of up to 568.7mil shares at RM1.70/rights has been oversubscribed by 32.53%.

- As at the close of acceptance, excess application and payment for the rights Issue on 30 July 2013, Sunway had received valid acceptances and excess applications for a total of 571.05mil rights shares.

- The number of valid acceptances totaled 426.99mil shares, representing 99.1% of the rights issue, while the valid excess applications were for 144.06mil shares or 33.43% of the total issue. Combined, these give the oversubscription of 32.53%.

- This means that Sunway would have raised its targeted maximum proceeds of RM967mil, which will be used for capital expenditure and paring down of debts. The rights shares are expected to be listed on 13 August 2013.

- The entire exercise includes the issue of 31.25mil additional warrants. Sunway has also proposed to issue up to 10% (up to 155.1mil shares) of its paid-up capital under an ESOS.

- Its major shareholders, including Sungei Way Sdn Bhd, Tan Sri Jeffrey Cheah and Sarena Cheah, collectively hold 51.48% or 221.77mil shares of the company, prior to the rights issue.

- Sunway is expected to launch phase 1 of its Sunway Iskandar project in Medini, with a GDV of up to RM350mil by early next year, comprising serviced apartments, office suites and a retail podium. Its medium- and long-term prospects largely hinge on the development of its 1,770 acre-landbank in Iskandar Malaysia over a 15-year period, with a potential GDV of RM30bil.

- The group also has 88 acres of undeveloped landbank in Bukit Lenang in Johor Bahru. Given the size of the planned development in Iskandar Malaysia and close proximity to Singapore, take-up rates would be highly dependent on the participation of foreign buyers.

- At the operating level, we expect the property development and the construction divisions to account for 42% and 22% of profit, respectively, for FY13F vs. 50% and 11% previously in FY12. 

Source: AmeSecurities