- Last Friday, Sunway proposed to undertake a recurrent dividend reinvestment scheme (DRS) that provides shareholders the option to reinvest their cash dividends in new ordinary shares of RM1.00 each.

- The proposal is expected to be ready for implementation by 2H14.

- The scheme would allow the board, at its absolute discretion, to offer dividends either via the proposed DRS or to pay cash in full, depending on its capital strategy and plans. Shareholders would have the right to elect to receive the entire or part of the dividend in cash.

- The issue price would be announced either on or before the date of the announcement of the books closure date. Shareholders who wish to receive their dividends entirely in cash are not required to take any action with regards to the notice of election.

- The issueprice of the new shares shall be the higher of:-

- (a) not more than 10% discount to the adjusted five (5)-market day volume-weighted average market price immediately preceding the price fixing date; the VWAP shall be adjusted ex-dividend before applying the discount; or (b) the par value of Sunway shares.

- The benefits include:- 1) providing Sunway the additional flexibility in managing capital position; 2) the issuance of new shares that will enlarge share capital base; 3) cash retained to fund the general working capital; and 4) Increase of its net assets with improving gearing ratio.

- We are neutral on the proposed DRS and maintain our forecasts. We reiterate our HOLD on the stock, with an unchanged fair value of RM3.08/share, based on a 5% discount to an SOP value of RM3.23/share. 

Source: AmeSecurities