Stock Name: SUNCITYCompany Name: SUNWAY CITY BHDResearch House: INTER PACIFIC
Sunway City Bhd
(Sept 3, RM3.99)
Maintain outperform at RM3.94 with target price of RM4.70: Our fair value is pegged at RM4.70 based on PER of 12 times and EPS of 39 sen, a 28% discount on the estimated RNAV per share of RM6.51. We maintain 'outperform'. We are positive on the acquisition considering; (i) a consistent income stream from Sunway Lagoon theme park. Sunway Lagoon Sdn Bhd (SLSB) anticipates at least a 20% increase in the visitorship for Sunway Lagoon; (ii) the development potential of Sunway South Quay and Australia Wonderland Industrial Land; (iii) improvement to earnings considering its 51% stake in SLSB Group contributed to 12% of SunCity Group's profit after tax (excluding revaluation gain) for the 18-month FY2009 ending December 31. SLSB registered PAT of RM53.3 million in FY2009.
Acquiring 45% of Sunway Lagoon Sdn Bhd minority interest via internal funds: Suncity presently owns 51% of Sunway lagoon group which effectively holds 30.6% equity interest each in Sunway South Quay and Eastern Glory. Upon acquisition, SunCity's effective stake in Sunway Lagoon Bhd would be elevated to 96%, raising its effective shares in Sunway South Quay and Eastern Glory to 60% each.
Potential of Sunway South Quay and Eastern Glory: Sunway South Quay, located in the integrated township of Bandar Sunway, is a massive development with a land area of 123 acres and gross development value (GDV) of RM5.2 billion. To date RM1 billion worth of properties have been launched, with RM836 million in the pipeline. Those recently launched include: (i) A'Marine condominium achieved an impressive take-up of 70%; and (ii) Bayrocks, a high-end bungalow development with GDV of RM350 million, achieved take-up of 40% mainly due to its steeper pricing. Eastern Glory is the holding company of one of its operations in Australia. Eastern Glory, a wholly own subsidiary of Sunway Australia Unit Trust, entered into a 50:50 JV with Australand to develop Australia Wonderland Industrial Land, a 46ha tract with GDV of RM800 million. In the current year, 20% of the development has been sold. ' Inter-Pacific Research, Sept 3
This article appeared in The Edge Financial Daily, September 6 2010.