PP 7767/09/2010(025354)

RHB 29
Research
Malaysia Corporate Highlights
June 2010
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New s Upda te
29 June 2010
MARKET DATELINE

Sunway Holdings Share Price

Fair Value
:
:
RM1.55
RM2.35
Secures A RM129m Contract To Build A Dairy Factory Recom : Outperform
(Maintained)
In Klang

Table 1 : Investment Statistics (SUNWAY; Code: 4308) Bloomberg: SGW MK

Turn- Net FD Net
FYE over Profit EPS# Growth PER EPS# C.EPS P/CF P/NTA ROE Gearing GDY
Dec (RMm) (RMm (sen) (%) (x) (sen) (sen) (x) (x) (%) (%) (%)
2009** 2,589.9 109.3 13.6 (27.0) 11.4 - - 9.6 1.5 9.5 0.6 1.5
2010f 2,519.8 137.1 22.8 67.9 6.8 17.9 21.0 12.6 1.2 15.1 0.5 1.8
2011f 2,519.2 151.1 25.2 10.2 6.2 19.5 23.0 15.6 1.0 14.3 0.4 1.8
2012f 2,960.0 170.1 28.3 12.5 5.5 21.8 25.0 12.6 0.8 13.9 0.3 1.8
Main Market Listing /Non-Trustee Stock / Syariah-Approved Stock By The SC #Excluding EI * Consensus Based On IBES
**18M ^Annualised

Issued Capital (m shares) 601.8

♦ Another contract. Sunway has secured a RM129m contract from private Market Cap (RMm) 932.7
company PML Dairies Sdn Bhd for the construction of a dairy product factory Daily Trading Vol (m shs) 0.9
in Klang, Selangor. The contract has boosted Sunway’s YTD new contracts 52wk Price Range (RM) 1.07-1.68
secured to RM537m (see Table 2) and its outstanding construction orderbook Major Shareholders: (%)
by 6% to RM2.4bn (see Table 3). Assuming an EBIT margin of 5-7%, the Tan Sri Jeffrey Cheah 43.3
contract will fetch a total EBIT of RM6.5-9.0m over the construction period of
12 months ending Jul 2011. We are positive on the development.
♦ Forecasts. No change in our earnings forecasts that already assume FYE Dec FY10 FY11 FY12
Sunway to secure RM1.5bn worth of new jobs in FY12/10. EPS Revision (%) - - -
♦ Risks to our view. The risks include: (1) New contracts secured in Var to Cons (%) +9 +9 +13

FY12/10-12 coming in below our target of RM1.5bn per annum; and (2)
PE Band Chart
Rising input costs.
♦ We are now upbeat on the construction sector. We foresee improved PER = 10x
PER = 8x
investors’ risk appetite for construction stocks following: (1) The massive PER = 6x
underperformance of the sector vis-à-vis the market in 4Q2009 and 1H2010; PER = 4x
and (2) A better sector news flow and new expectations on the heels of the
recent announced 10th Malaysia Plan (10MP).
♦ High construction margins. Sunway’s construction margins will remain
strong over the next few quarters thanks to strong contributions from the
high-margin pre-cast concrete components contract in Singapore and Rihan
Heights project of the Arzanah Development in Abu Dhabi, UAE. Relative Performance To FBM KLCI
♦ Strong property profits from Malaysia. We also expect strong profits
from Sunway’s property business in Malaysia, driven by boutique Sunway Holdings
developments. On the heels of strong take-up for the recently launched
RM165m Sunway Rydgeway in Melawati comprising 40 bungalows and 30
semi-detached houses, Sunway will over the next 6-9 months start to put
onto the market similar products in Templer, Taman Equine and Puncak Jalil FBM KLCI

with a total GDV of RM870m.

♦ Non-construction profits can anchor growth. The slow roll-out of public
jobs locally at present will not derail Sunway’s overall growth prospects as:
(1) Sunway has been able to secure private sector jobs including those from
sister company SunCity; and (2) Rising non-construction profits, particularly,
those from property development and trading/manufacturing, can still
anchor group earnings growth.
♦ Maintain Outperform. Indicative fair value is RM2.35 based on 12x fully-
Joshua CY Ng
diluted FY12/11 EPS of 19.5sen, line with our benchmark 1-year forward (603) 92802151
target PER for the construction sector of 10-16x. joshuang@rhb.com.my

Please read important disclosures at the end of this report. Page 1 of 3

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
 29 June 2010

Table 2: New Jobs Secured YTD

When Job Client Value
(RMm)
Feb 2010 Residential units/TNB sub-station, Shah Alam SunCity 22
Apr 2010 Impiana Hotel, KLCC Private 88
May 2010 Sunway Office Tower (substructure) SunCity 88
May 2010 Sunway Velocity (shop-offices & apartments) SunCity 210
Jun 2010 Dairy product factory in Klang, Selangor Private 129
Total 537
Source: Company

Table 3: Outstanding Construction Orderbook

Project Outstanding Works
(RMm)
Overseas
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (excluding M&E and stone & tiling works) 469^
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (M&E) 216*
Rihan Heights, Arzanah Development in Abu Dhabi, UAE (stone & tiling works) 46#
Pre-cast concrete components in Singapore 354
Road projects in India 48
Al Reem Island, Abu Dhabi 91
Total 1,224

Local
Government office towers in Precinct 4, Putrajaya 297
Sunway Velocity (shop-offices & apartments) 210
Dairy product factory in Klang, Selangor 129
Hotel and office tower in Precinct 1, Putrajaya 144
Impiana KLCC (Phase 2) 88
Sunway office tower (substructure) 88
South Klang Valley Expressway 34
Others 149
Total 1,139

Grand Total 2,363

^60% share of RM782m *75.1% share of RM288m #70% of RM65.7m
Source: Company, RHBRI

Table 4: Earnings Forecasts Table 5: Forecast Assumptions

FYE Dec (RMm) FY09a* FY10F FY11F FY12F FYE Dec FY10F FY11F FY11F

Turnover 2,589.9 2,519.8 2,519.2 2,960.0 Construction EBIT margin (%) 8.6 7.5 6.8
Turnover growth (%) -5.3 45.9 0.0 17.5 New orderbook secured (RMm) 1,500 1,500 1,500

EBITDA 178.8 248.7 240.4 261.4

EBITDA margin (%) 6.9 9.9 9.5 8.8

Depreciation -43.0 -45.1 -47.4 -49.8

Net Interest -54.0 -28.4 -26.7 -25.0
Associates 72.2 38.3 58.0 58.0
EI 0.0 0.0 0.0 0.0

Pretax Profit 153.9 213.5 224.3 244.6

Tax -33.9 -44.7 -50.8 -57.7
PAT 120.1 168.9 173.5 187.0
Minorities -10.8 -31.7 -22.3 -16.9
Net Profit 109.3 137.1 151.1 170.1
*18M ^Annualised
Source: Company data, RHBRI estimates

Page 2 of 3

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
 29 June 2010
IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

Page 3 of 3

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com