In the news

PETALING JAYA: Sunway Construction Bhd has come full circle, as it will be relisting on Bursa Malaysia for the second time after an 11-year absence.

The company is one of the few large public offerings that will make their debut in the market this year.

And while the listing could be fairly well-received by investors, this would also ultimately depend on the valuation that the offering will finally be fixed at.

Its major shareholders stand to gain the most from this relisting, as it was privatised at a valuation of five times earnings, against an indicative historical valuation of 12.5 times earnings when it goes public again soon.

The listing this time around will see parent company Sunway Bhd raising RM441.1mil at an indicative offer price of RM1.10.

Proceeds from the offer for sale will be used for Sunway Bhd’s working capital and would be mainly distributed back to its shareholders in the form of a special cash dividend.

Back in August 2004, Sunway Construction was privatised from the-then Kuala Lumpur Stock Exchange following a voluntary general offer by Sunway Bhd.

Sunway Construction, which was prior to that also known as Sungei Way Construction Bhd, remained a public-listed entity for seven years before it was privatised by its major shareholders.

Notwithstanding the improved valuations granted to the construction sector today, Sunway Construction could be an interesting proposition for investors coming on board, and may ride on the positive bias for the industry following the announcement of the 11th Malaysia Plan (11MP).

Despite this, market makers cautioned that what may work against the planned listing could be the overall market sentiment.

“Malakoff Corp Bhd’s lackadaisical performance since its listing this month, coupled with the overall sluggish market and concerns of a weakening ringgit, are negatives for any large offerings coming to the market now,” said a banker.

“The market seems to be wishy-washy on whether the bulls can take charge of this upcycle, but I feel we are still in the early stages of a new second major uptrend that can eventually sustain interest in such public offerings in the bigger picture,” a dealer said.

Post-Sunway Construction’s listing, it will become the largest pure play construction company in Malaysia.

Most other construction companies from among the bigger players such as Gamuda Bhd and IJM Corp Bhd also derive their earnings in part from the property industry.

Gamuda, which derives most of its earnings from the construction industry, also sees property revenue contributing 43.7% of its sales of RM1.22bil in the first half of its financial year ending July 31, 2015 (FY15).

IJM Corp, meanwhile, derives most of its earnings from the property industry and saw 47.3% of its overall pre-tax profit in the cumulative third quarter of its financial year ended March 31, 2015 being derived from the property sector.

IJM Corp only derived 14.7% of its pre-tax profit from the construction sector.

Sunway Construction, on its part, has an orderbook of RM3.4bil, with key construction projects being undertaken.

These projects include the Mass Rapid Transit Package V4, Light Rail Transit at the Kelana Jaya line extension, Bus Rapid Transit (BRT) – Sunway line, Afiniti Urban Wellness Centre, KLCC North East Carpark and KLCC Package 2.

The company may also be poised to benefit from the construction of more BRT lines should the Government decide to build more of such modes of public transportation, as it funded 15% of the Sunway BRT although it was a 70% Prasarana Malaysia Bhd-led project.

Prasarana had earlier indicated that the Government does intend to build more of such modes of public transportation, although those plans have not been finalised yet.

Sunway Construction had earlier also noted that since it is registered as a Grade 7 construction company with the Construction Industry Development Board, it can tender for contracts of unlimited upside value.

Its construction arm, Sunway Construction Group Bhd, which was a wholly owned unit of Sunway prior to its listing, had recorded a strong uptrend in earnings in the past three financial years.

In FY14 ended Dec 31, its construction arm posted a net profit of RM118.92mil on the back of an RM1.75bil revenue. This was a strong growth of 130% from FY13, while revenue also grew by 10% from RM1.59bil in FY13.

Moving forward, the stock and the wider sector may come under the spotlight again should interest pick up after some selling on the news following the announcement of the 11MP.

Despite some lacklustre sentiment following the announcement of the 11MP, analysts said the market could pick up again once it recovered from this lull, as long as earnings strength on the company-front remained intact.

Other dealers attributed the decline to some selling on the news action that was bound to be seen, especially after such an announcement.

-- The Star