SUNWAY – Fundamental Analysis (10 Mar 2015)

SUNWAY Analysis:-

Excel –

Notes –

My View:-

  • Valuation:
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.431) – Fair value 4.08 (Fair Value Uncertainty: MEDIUM)
        • R4Q (EPS: 0.431) – Fair value 4.08 (Fair Value Uncertainty: MEDIUM)
      • Forward:
        • FY15 (EPS: 0.32) – Fair value 3.02 (Fair Value Uncertainty: HIGH)
        • FY16 (EPS: 0.323) – Fair value 3.06 (Fair Value Uncertainty: HIGH)
      • EPS applied to reach the current stock price (3.44): 0.364
    • 5Y DCF:
      • Good Scenario: 9.1 (Fair value uncertainty: LOW)
      • Base Scenario: 8.01 (Fair value uncertainty: LOW)
      • Bad Scenario: 7.06 (Fair value uncertainty: LOW)
      • Ugly Scenario: 6.21 (Fair value uncertainty: LOW)
      • At current price (3.44), based on RDCF, assumption of FCFF growth rate in the next 5 years is -21%.
  • SUNWAY FY14 performance is quite impressive.
    • Property division achieved new sales of RM1.7b which was slightly lower than FY13’s RM1.8b.
    • Construction division EBIT margin which has improved significantly to 7.9% in FY14 (against FY13’s 1.9%).
      • The higher construction margin in FY14 may be as a result of higher contribution from better margin construction job in precast concrete products.
  • Sunway Construction (SCG) listing likely to be in Jun-15. On 9-Feb-2015, SUNWAY announced that its proposal to list SCG has received Securities Commission approval.
  • In the long term, the consistency of the Company in meeting earnings target and dividend payment should support its share price.
  • On the other hand, in view of slowdown in property industry and cooling off in Iskandar area, even if SUNWAY aims to achieve a similar RM1.7b new sales, I am not so optimistic with the industry outlook.
  • In terms of DCF valuation, in long term, SUNWAY valuation is very attractive. In short term, EY% valuation is not so attractive due to lower EPS estimation for FY15 and FY16.
  • I will buy SUNWAY again if there is a good (technical) buy opportunity.

Latest Financial – Q4 2014 Financial Report (25 Feb 2015)

At the time of writing, I did not own shares of SUNWAY.


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