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.