Sunway Construction Group said to be worth RM1.65bil


Experienced track record: A flyover located at Balakong, along the Silk Highway. The structure was built by Sunway Construction. - Filepic

PETALING JAYA: Analysts are estimating that Sunway Construction Group (SCG) is worth between RM1.4bil and RM1.65bil following the announcement of its proposed listing on the Main Market of Bursa Malaysia in the second quarter of 2015.

Sunway Bhd announced last Friday that its entire construction division, Sunway Construction Sdn Bhd (SunCon), will be injected into SCG, a newly formed holding company.

Sunway’s shares closed up 16 sen yesterday to RM3.52 from its previous close of RM3.36 last Friday.

Alliance DBS Research analyst Quah He Wei said that assuming financial year 2014 (FY14) earnings of RM110mil (RM50mil in the first half) and a 15 times price-to-earnings (PE) ratio multiple, SCG could be valued at RM1.65bil.

“This may result in special cash dividends of RM460mil or around 27 sen per share for Sunway’s existing shareholders. This comes in addition to the free SCG shares which could be worth 13 sen per share,” he said in a research note yesterday.

Quah said Sunway’s construction division had a robust outlook with its order book remaining strong at RM3.4bil, adding that management was confident of achieving its FY14 order book replenishment target of RM2.5bil.

Maintaining a “buy” call with a target price of RM3.90, he said Sunway was currently trading at 10 times the FY15 forecast earnings per share.

“This is unjustified in our view, given its superior ‘build-own-operate’ model which is unrivalled by most of its peers,” he said.

Hong Leong Investment Bank (HLIB) Research analyst Grace Chew said the proposed listing came as a positive surprise, as the exercise would unlock Sunway’s value of investment in SCG as well as enhance SCG’s visibility as a pure construction company.

She said that assuming a 15 times P/E multiple to SunCon’s annualised profit after tax and minority interest of RM100mil, its potential market cap would reach RM1.5bil or RM1.16 per share.

“Assuming 70% of offer-for-sale proceeds are declared as a special cash dividend, existing shareholders of Sunway could potentially receive RM326mil or 19 sen per share. Hence, in total, total capital repayment (will be) worth RM526mil or 31 sen per share,” she said in a research note.

Chew said HLIB Research’s “hold” call has been maintained, as the total potential return was less than 10% but its target price was upgraded to RM3.55 based on a sum-of-parts valuation.

Affin Hwang Capital analyst Isaac Chow said he foresaw keen investor demand for SCG shares in view of the positive construction sector outlook and SCG’s strong project track record.

Backed by RM3.4bil of outstanding order book, he estimates that SCG would deliver RM100mil in net profit for the FY15 estimate.

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