News

• Sunway declared special cash dividend of RM0.26 per share. Total dividend payout is about RM448m. Ex-Date is 30 Sept 2015.

Highlights

• We are positive with the announcement of special dividend. This is came from the proceeds raise from the offer for sale of Sunway Construction shares to reward Sunway Group’s shareholders.

• This is also inline with our expectation of 25-28 sen/share of special dividend (based on 90-100% payout from the offer for sale proceed).

• Year to date, Sunway have paid out 43 sen/share after take into consideration the dividend specie in the distribution of SunCon shares and regular dividend (Refer Fig 1). In addition, we expect another 5sen/share to declare by 4QFY15 which bringing total dividend to 48 sen/share in FY15 or potential dividend yield of 14%.

• As at 1HFY15, effective property sales was RM353m while its effective unbilled sales stood at RM1.7bn (1.4x of Sunway’s FY14 property development revenue).

• We expect property sales for FY15 to remain modest given tough market envi ronment. Management still maintain its full year target of RM1.2bn effective sales and target to launch RM2.1bn worth of projects in 2H15. We understand there are ci rca RM1.85bn of US$ borrowing in the balance sheet but this has been fully hedged and reflected in the latest quarter result report.

Risks

• Execution risk; Regulatory and political risk (both domestic and overseas); Rising raw material prices; and Unexpected downturn in the construction and property cycle.

Rating

BUY

• We remain optimistic about the group and believe Sunway will continue to do active capital management to reward shareholders.

Valuation

• TP is unchanged at RM3.75, based on SOP valuation. Maintain BUY.

Source: Hong Leong Investment Bank Research - 3 Sep 2015