Stock Name: SUNWAY
Company Name: SUNWAY HOLDINGS BHD
Research House: OSK

Sunway Holdings Bhd
(Sept 27, RM1.91)
Maintain buy at RM1.79 with target price RM2.52: Last Friday, Sunway announced on Bursa Malaysia that it had entered into a joint-venture agreement with Dasa Tourist Complex Private Ltd (Dasa) to undertake a mixed development in Colombo, Sri Lanka. The development will comprise at least 318,000 sq ft of net saleable areas comprising residential units and 60,000 sq ft of commercial units.

Sunway will have a 65% stake in the JV while Dasa will hold the balance of 35%. Dasa is a Sri Lankan incorporated company with its primary business being in the manufacture of textiles and garments.

It is estimated that the proposed mixed development will have a gross development value (GDV) of US$80 million (RM250 million). The development will comprise a 34-storey building consisting of 70 commercial and 180 residential units with an ocean view. It will be located roughly 5km from the central business district of Colombo. Colombo is the largest city in Sri Lanka (former capital) with an estimated population of 1.3 million. The central business district of Colombo is located 40km from the Bandaraneyake Airport.

Following the defeat of the Liberation Tigers of Tamil Eelam in May 2009, Sri Lanka is now enjoying political stability. The International Monetary Fund projects Sri Lanka's gross domestic product to grow by 5.5% in 2010 and 6.5% in 2011. Both economic growth and a stable political climate have spurred an uptrend in its property prices. Prices have also been supported by limited supply in both the residential and commercial segments.

Management expects the launch to take place in 2Q2011. Our estimates are, however, unchanged for now as we are unable to ascertain the potential take-up rate from this new venture. We have a three-year earnings CAGR forecast of 33.9%. Our RM2.52 target price continues to be based on 12 times partially diluted mid CY2011 EPS. Sunway remains one of our top sector picks for its undemanding valuation and strong earnings growth. ' OSK Investment Research, Sept 27


This article appeared in The Edge Financial Daily, September 28, 2010.