PP 7767/09/2010(025354)

28 September 2010

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

N ew s Updat e
MARKET DATELINE 28 September 2010

Sunway City Share Price

Fair Value
:
:
RM3.90
RM5.48
Another Landbanking Effort Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (SUNCITY; Code: 6289) Bloomberg: SCITY MK

Net Net
FYE Turnover Profit# EPS# Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009** 1,067.3 150.0 31.9 13.9 12.2 - 3.7 0.8 6.9 53.4 2.2
2010f 902.7 163.5 34.8 9.0 11.2 41.6 3.1 0.8 7.2 Net cash 9.3
2011f 1,032.8 193.9 41.3 18.6 9.4 42.1 7.9 0.7 8.0 Net cash 2.2
2012f 1,217.4 226.3 48.2 16.8 8.1 49.0 7.6 0.7 8.7 Net cash 2.6
Main Market Listing / Non-Trustee Stock / Non-Syariah-Approved Stock By The SC #normalised **annualised * Consensus Based On
IBES

♦ Buying Penang land for RM38.8m. Suncity announced that its wholly-owned Issued Capital (m shares) 470.0
subsidiary – Sunway City (Penang) S/B had entered into a Sale and Purchase Market Cap (RMm) 1,833.0
Agreement (SPA) with Sungei Ara Holdings S/B to acquire a freehold land in Daily Trading Vol (m shs) 0.4
Penang, measuring 32.74 ha (or 80.9 acres). Total cash purchase consideration 52wk Price Range (RM) 2.88-4.28
Major Shareholders: (%)
is RM38.8m, funded by internal funds.
Tan Sri Dato’ Seri Dr 40.3
♦ Location of the land. The price tag translates into RM11 psf, which is rather
Cheah Fook Ling
Government of Singapore 21.4
attractive. The land is located at the south-west of Penang Island, surrounded Investment Corporation
by matured townships, such as Rain Tree Garden, Regency Heights, Vistaria
Apartment and Sunrise Garden etc in Sungei Ara, as well as Suncity’s existing
FYE Dec FY10 FY11 FY12
project Sunway Merica. The land is also near to Penang International Airport, EPS chg (%) - 6.7 11.0
which is undergoing planning for expansion. It is also close to the new Penang Var to Cons (%) (16.4) (2.0) (1.7)
Second Link Bridge, which is currently under construction and is easily
PE Band Chart
accessible via Jalan Dato Ismail Hashim.

♦ For high-end landed development, with a GDV of RM800m. The proposed PER = 11x
PER = 9x
development for the new landbank comprises semi-ds and bungalows, and is PER = 7x
estimated to yield a GDV of RM800m. As the acquisition is expected to be PER = 5x

completed within six months from the date of SPA, we think first launches of
the project would be around mid-2011. Suncity’s ongoing projects (Sunway
Merica, Sunway Aspera and Sunway Perdana) are selling well, with a take-up
rate of about 40-45% on average with signed SPAs.

♦ Forecasts. The estimated GDV of RM800m is higher than expected as our

Relative Performance To FBM KLCI

forecasts were previously based on a GDV of RM621m as guided by

Sunway City
management earlier. Hence, we correspondingly adjust our FY11-FY12 earnings
up by 7-11%.
FBM KLCI
♦ Risks. The risks include: 1) a drastic cap on lending rate imposed by Bank
Negara Malaysia; 2) higher tax bracket for real property gain tax (RPGT); 3)
delays in launches and approvals; and 4) country risks.

♦ Investment case. As a result of higher-than-expected GDV, our RNAV per

share estimate is revised to RM6.44, from RM6.41. Based on an unchanged
15% discount to RNAV, our indicative fair value is raised slightly to RM5.48,
from RM5.45. We maintain our Outperform rating on the stock.
Loong Kok Wen, CFA
(603) 92802237
loong.kok.wen@rhb.com.my
Please read important disclosures at the end of this report.

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Table 2. Earnings Forecasts

FYE Dec (RMm) FY09a FY10F FY11F FY12F

Revenue 1,067.3 902.7 1,032.8 1,217.4

Operating profit 246.3 186.8 223.5 253.6

Interest expenses (69.9) (88.3) (59.5) (56.0)

PBT 760.9 233.6 278.9 328.0
Tax (183.7) (58.4) (71.1) (85.3)
Minority interest (218.6) (11.7) (13.9) (16.4)
Normalied net profit 150.0 163.5 193.9 226.3
EPS (sen) 31.9 34.8 41.3 48.2
DPS (sen) 13.0 36.0 8.5 10.0

Note: FY09 numbers are annualised

Source: Company data, RHBRI estimates

Table 3: RNAV breakdown

Type Stake
EBITDA Mkt Value Book Value Valuation Surplus
Remaining Investment Properties (RM mil) (RM mil) (RM mil) (RM mil)
Monash University Campus 100% 5.2 158.0 158.0 0.0
Sunway University College 100% 8.9 150.0 150.0 0.0
Sunway Hotel, Penang 100% 2.5 63.0 63.0 0.0
Sunway Medical Centre 78% 10.4 184.0 184.0 0.0
Sunway Hotel Phnom Penh 53% 3.1 32.3 31.0 0.4
Sunway Giza 60% 2.6 44.1 28.8 6.0
Sunway Hotel Hanoi 100% n.a. 56.1 56.1 0.0
Subtotal: 30.1 587.3 586.0 6.4

Property Development Acres GDV NPV @ 13.2% Surplus for Suncity

Sunway South Quay 31% 58 4,063 403.4 125.1
Sunway Velocity 50% 23 3,052 318.2 159.1
Damansara 60% 24 1,118 111.0 66.6
Integrated Resorts 100% 18 462 45.8 45.8
Melawati 100% 33 461 45.8 45.8
Sunway Towers KL 100% 1 240 23.8 23.8
Taman Duta 60% 3 200 19.9 11.9
Others 100% 49 388 38.6 38.6
Penang Grp 100% 133 1,092 108.4 108.4
Semenyih 100% 398 1,105 83.9 83.9
Ipoh 65% 750 287 21.8 14.2
Opus, India 50% 35 1,174 94.3 47.2
MAK, India 65% 14 380 34.0 22.1
Australia 31% 148 800 71.5 22.2
Tianjin Eco City 60% 102 5,000 424.0 254.4
Jiangyin, China 39% 17 492 48.8 19.1
Subtotal: 1,087.9

Total 1,094.3
NTA FY09 2,174.6
Warrants conversion 746.6
RNAV 4,015.5
Enlarged shares base (mil) 623.3

Fully diluted RNAV per share (RM) 6.44

Discount 15%
Fair value per share 5.48

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IMPORTANT DISCLOSURES

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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.

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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.

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