- 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.

- Sunway is selling 20% of its wholly-owned unit Sunway REIT Management Sdn Bhd (SRM), the manager of Sunway REIT, to Millennium Pavilion Sdn Bhd (MPSB) for RM28mil. This appears to be a move to bring in a more entrepreneurial drive into the REIT management company, which could potentially pave the way for Sunway REIT to acquire properties other than those in Sunway’s portfolio.

- Sunway deems the transaction as a proposed JV with MPSB. It says the consideration is based on a PE ratio of 10 times 2012 earnings. The transaction is expected to be completed by 2H13. MPSB’s shareholders comprise Carlsberg Brewery Malaysia Bhd chairman Dato’ Lim Say Chong, Oh Kim Sun and Ng Sing Hwa, “with a wealth of experience in the property, banking and manufacturing industries.”

- Sunway says “with their extensive experience in the corporate world and wide network of contacts, MPSB would be able to add value to SRM by providing additional leads for property acquisition.” Sunway will realise a gain of RM26mil. The JV is a positive for the group.

- It said subsequently, the group would not be required to consolidate the financials of Sunway REIT under the new “FRS 10–Consolidated Financial Statements,” which takes effect from 1 January 2013. Sunway had on Wednesday entered into share sale and shareholders’ agreements with MPSB, which require the SC’s approval. MPSB will be entitled to appoint one director in SRM.

- Lim was a former group MD of Chemical Company of Malaysia (CCM) (1989-2004) and former MD of ICI Paints (M) Sdn Bhd in the 1980s.

- Oh sits on the boards of UEM World, UEM Sunrise, Pharmaniaga, Faber, Linkedua, and Nasdaq-listed IMPAX Laboratories Inc. Oh reportedly led the successful management buyout of ICI’s Malaysian operations in 1994 and was subsequently CCM group ED until 2003.

- Ng, who runs his own property development group Miramas, was the former executive chairman of Bertam Alliance Bhd (2002-2012), former group MD of CI Holdings Bhd (1985-1988) and former director and group chief executive of Faber Merlin Malaysia Bhd (1977-1985).

- Sunway’s medium- and long-term prospects largely hinge on its planned development of its 1,770 acre-landbank in Iskandar Malaysia, which will be developed over a 15-year period, with a potential GDV of RM30bil.

Source: AmeSecurities