Friday, March 01, 2013

Sunway- an attractive construction-based group

 Background

Sunway Bhd is involved in the following businesses:
- Integrated Properties
- Construction
- Trading & Manufacturing
- Quarrying
- Building material
- Healthcare
It is the result of the merger between Sunway Holdings Inc. Bhd & Sunway City Bhd which was completed in early 2011.

Recent Financial Results

For QE31/12/2012, Sunway's net profit increased by 133% q-o-q or 55% y-o-y to RM219 million while revenue increased by 38% q-o-q or 30% y-o-y to RM1.2 billion. Its running net profit & revenue for the past 4 quarter to QE31/12/2012 amounted to RM532 million & RM3.88 billion, respectively. This compared favorably with the preceding 4-quarter net profit & revenue of RM388 million & RM3.69 billion,, respectively.


Table 1: Sunway's last 8 quarterly results


Chart 1: Sunway's last 8 quarterly results

Financial Position

Sunway's financial position as at 31/12/2012 is deemed fair, with current ratio at 1.58 times and gearing ratio at 0.82 time.

Valuation

Sunway (at RM2.57) is trading at a PE of 6.25 times (when compared to the last 4 quarters' EPS of 41.14 sen). This compared favorably to construction-based groups such as Gamuda, IJM & WCT. If you look at the table below, you will see that only WCT with a such a low PE. The reason for WCT's low PE is that its recent net profit was boosted by a fair value gain of RM218 million. If this exceptional item is excluded, WCT's 4-quarters' EPS was dropped to 14.7 sen & its PE ratio would rise up to 15.2 times. Thus, Sunway looks fairly attractive.


Table 2: Sunway & other construction stocks compared

Technical Outlook

Sunway has broken above its strong horizontal resistance at RM2.46 a few days ago. It is now testing its next resistance at RM2.57.


Chart 2: Sunway's weekly chart as at Mar 1, 2013_12.20pm (Source: quickcharts)

Conclusion

Based on good financial performance, reasonably healthy financial position, attractive valuation & positive technical outlook, Sunway is rated a good stock for long-term investment.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Sunway.

10 comments:

Chong Long Choo said...

I agree with your point, and already sapu a lot at below RM2 when jeffery's family sapu

luckystock2 said...

Hi Alex ,
I'm really agree with you.I bought some Sunway shares a few months ago at RM2.20. But again the election risk defers me from buying heavily into the stock. Don't you think we should wait only after the election to invest more into this company since its a construction company which heavily related to politics ?
Tx!

vincent chua said...

Hi Alex,
Do you forsee any political risk on Kfima post GE13?

Foundamentally it is very good and its share price has been retracted from high level.

Jimmy Yeoh said...

Hi Alex,

Can you kindly comment on SMRTECH. Thanks.

Alex Lu said...

Hi Jimmy Yeoh

SMRTECH's financial performance has deteriorated in the past two quarters. Its net profit dropped from RM4.2 million in QE30/6/2012 to RM62k in QE31/12/2012 while its revenue declined from RM20.3 million to RM12.1 million during the same periods.

Chartwise, it is now hanging onto the horizontal support if RM0.20. This is a strong support and hopefully it will rebound from here. A breakdown would lead to further decline to RM0.13-0.15.

Alex Lu said...

Hi vincent chua

Kfima reported an EPS of 23.45 sen for 9-month ended 31/12/2012. That translates into a full-year EPS of 31 sen. At the present price of RM1.82, KFima is trading at a PE of 5.9 times, which is quite attractive.

Chartwise, KFima has broken below its long-term uptrend line. It may have entered into a sideway movement with support at RM1.75. Immediate resistance is at RM2.00.

james said...

Hi Alex,

Wonderful job you are doing in this blog! I have 2 questions for you.

Firstly, what are the price target objectives from a technical analysis standpoint for Sunway if it manages to close above the historical high of RM2.75 on good volume?

Second question is on Sunway-wa. The exercise price is RM2.80 and the expiry is not until Aug2016. If the mother share is able to hit the above price target objective, what is the warrant's price target objective?

Thanks,
James

networking said...

Hi Alex,

Sunway share price is dropping now due to right issues. What is the estimated share price after right issue ?

Please help!!!

Alex Lu said...

Hi james

I thought Sunway had a fantastic rally and it needs to consolidate for a while. I am happy that it is able to climb back above the 50-day SMA line at RM3.05-3.10. From here, it may rise to test its resistance at RM3.50. I am doubtful that it can surpass the RM3.50 in the near term. With that, I feel that the RM3.50 is a trading SELL.

The warrant found its support at the horizontal support of RM0.70-0.75. It will move in line with the share, possibly testing its recent high of RM1.10-1.15.

Alex Lu said...

hi networking

The theoretical ex-right will be RM3.11 which is arrived at as follows:
= [(3.58 x 3) + (1.70 x 1)]/4

Th uptrend line (if you ignored the slight violation in early May) is still intact. The support from that uptrend line is at RM3.10.

As such, the good support is at RM3.10 or the 50-day SMA line at RM3.05-3.10 or the psychological RM3.00 level.