- We maintain BUY on Sunway with an unchanged fair value of RM3.60/share, based on a 15% discount to our SOP value of RM4.25/share.

- Sunway announced earlier this week that its to-be-listed subsidiary Sunway Construction Sdn Bhd has secured a RM169.86mil contract to design and construct the proposed Coastal Highway Southern Link in Johor.

- SunCon had on 29 December 2014 signed the letter of acceptance issued by Iskandar Investment Bhd’s (IIB) subsidiary SJIC Bina Sdn Bhd in respect of the proposed infrastructure development. The 24-month project is expected to commence on 7 January 2015.

- Sunway said the project is expected benefit Sunway Iskandar, a major township project by Sunway, Khazanah Nasional Bhd and IIB, and other developments in Medini Iskandar Malaysia and its surroundings including those by UEM Sunrise and Mulpha International, due to the improved connectivity to the Coastal Highway and shortened travelling time to the Second Link to Singapore to about five minutes.

- This brings the total new order for 2014 to RM1.05bil, most of which except for the latest contract are internal projects. The total outstanding order book remained at RM3.3bil.

- Our fair value offers an upside potential of 25% comprising a capital gain of 12% and in the form of cash and share dividends (of Sunway Construction shares which is to be listed by 2Q15) at another ~13%.

- The stock is now trading at an undemanding 11x and 10x PE on FY14F and FY15F fully diluted earnings, respectively (taking into account proceeds from warrants/ESOS).

Source: AmeSecurities