Monday, October 05, 2009

Why I Like Sunrise





Share price shot up 40% since early May 2009, but PER valuation are undemanding still. Recent analyst briefings reveal an improved picture. The stock has been building a minor base around RM2.00 and looks set to push past its 52 weeks high of RM2.09 soon. Slated to make 31 sen per share for FY2010, its just trading at 6.5x. Property stocks have been rerated over the past couple of months, but Sunrise has not yet gain anywhere as much as the other players.
Sunrise posted another record pre-tax profit of RM205.8 million for its financial year ended June 30, 2009 (FY09) on the back of its highest ever annual revenue of RM803.92 million. Compared with FY08, these represent a 2% rise in pre-tax profit from RM201.1 million and a 17% increase in revenue from RM685.8 million. At net level, FY09 profit fell 2% to RM156.3 million from RM159.9 million. However, FY09 results would have outperformed FY08 if the one-off gains of RM19.4 million in FY09 and RM46.6 million in FY08 were excluded. Excluding the one-off gains, the group’s underlying pre-tax profit for FY09 would have increased by 21% to RM186.3 million. That's quite a sustained performance over a difficult period. It has a lot to do with a strong brand and maintaining it, and a good strategy in rolling out viable projects.

Catalysts will come from much better earnings visibility. Sunrise has some RM970m in unbilled sales and RM449m in available inventories as at end-June 09. Sunrise expects to rake in at least RM200m in new sales in 1QFY10 (4QFY09: RM87m, 1QFY09: RM216m), mainly from The Residence and MK11 projects. The SPAs of The Residence at Mont Kiara worth some RM76m will likely be signed in 1QFY10, providing an immediate boost to earnings as the project is sold under the built-then-sell concept. Additionally, MK11 is now approximately 90% sold (30 Jun ’09: 73%) worth RM150m in new sales in 1QFY10.

There are 5 projects in the pipeline, namely MK28, MK20, Solaris KL, KLCC (Wisma Angkasaraya) and the Canadian project. With steel being a key component of high-rise construction, Sunrise has also stocked up its steel inventory to lock in the current low steel prices.The renewed interest in the property market would encourage Sunrise to launch MK28 (GDV RM700mil) in FY10F. MK28 is a luxury apartment, comprises of 400 units with unit sizes from 2,275 sq ft to 2,756 sq ft. It is located on a 5.8 acre piece of land next to the completed MK Banyan.

Is planned office tower development in the CBD KL had already been granted approvals from the authorities. It sits on a 1.8 acre piece of land near IGB’s Cendana apartment at Jalan Sultan Ismail. This development - to be called Solaris Tower KL - comprises of 2 towers (Tower 1 - 40 storey and Tower 2 - 20 storey) with gross floor area estimated at 899,521 sq ft. It also has a seven storey elevated carpark and three levels of basement carpark.

Still deciding on MK20 and Angkasa Raya land project Sunrise is still contemplating on the development concept for MK20 (GDV of RM767mil) thus launching is not expected in the near future. MK20 is a mixed commercial development comprising offices and serviced apartments. This development sits on a 6 acre piece of freehold land - two lots away from Plaza Mont Kiara.

Its project near KLCC, i.e.on Angkasa Raya land would only be launched in FY11F as Sunrise is still deciding on the design and concept of this development.

Solid dividend stock even though that is stopped for the time being. RNAV is between RM2.80-RM3.30. Sunrise has abandoned its dividend policy of paying 35% of net profits until it is able to monetise Solaris Dutamas retail mall (307,087 sf and 5000 car parks). The mall, expected to open in end 2011, is held for rental income.

Sunrise’s plan to launch two projects with a combined GSV of more RM1.2bn, namely MK28 (high-end residence) after CNY in 2010, and (ii) Solaris Towers (office blocks, near KLCC). All necessary approvals for both projects have been obtained. Sunrise is looking to sell Solaris Towers on a strata basis while not discounting a possible en-bloc deal.

A strong brand name, many investors do not realise that it has a very attractive landbank. In Mont Kiara its has 82 acres with a market value of RM834m, 3.4 acres in KL city with a value of RM207m, a 50% stake in 276 acres in Seremban with a value of RM602m, 58 acres in Kajang with a value of RM164m, 431 acres in Mersing with a value of RM93m and 4.8 acres in Canada with a value of RM117m.

The outlook for Klang Valley luxury condos has improved somewhat but the stratospheric luxury condos, those priced above RM1,000psf, are mostly the ones affected. Investors are lumping Sunrise together with them, which is unfair. Having said that, Sunrise's projects are more viable and certainly not as expensive.

At the current price RM2.19, I would be confident that it can garner my required 30% return within 6-12 months.

Shares Issued: 490m
Shareholders (percentage ownership)

Updated: September 9, 2009


Public Nominees (Tempatan) Sdn. Bhd. (for Casa Unggul Sdn Bhd)

18.25%


AMSEC Nominees (Tempatan) Sdn. Bhd. (AmBank (M) Berhad for Phoenixflex Sdn. Bhd.)

6.36%


Employees Provident Fund Board (EPF)

6.05%


ECML Nominees (Tempatan) Sdn. Bhd. (Avenue Invest Berhad for Lim Kim Huat (E00580))

5.49%


A.A. Anthony Nominees (Asing) Sdn. Bhd. (for Surin Upatkoon)

4.9%


ECM Libra Investment Bank Berhad

4.25%


Cartaban Nominees (Asing) Sdn. Bhd. (SBBT Fund D26J for Emerging Markets Global Small Capitalization Fund (TEMMUF))

3.43%


Nik Awang @ Wan Azmi bin WAN HAMZAH, Tan Sri

3.26%


Cartaban Nominees (Asing) Sdn. Bhd. (Exempt AN for Raffles Nominees (P) Ltd. (CIBC SG FR CLNT))

3.03%


Lembaga Tabung Haji (TH)

2.34%


CitiGroup Nominees (Asing) Sdn. Bhd. (Exempt AN for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign))

2.29%


CitiGroup Nominees (Asing) Sdn. Bhd. (UBS AG Singapore for Great Challenge Limited)

2.06%


CIMSEC Nominees (Tempatan) Sdn. Bhd. (CIMB Bank for Yam Kong Choy (MY0480))

1.01%


HSBC Nominees (Asing) Sdn. Bhd. (Exempt AN for JPMorgan Chase Bank, National Association (U.K.))

0.92%


Cartaban Nominees (Tempatan) Sdn. Bhd. (MIDF Amanah Asset Nominees (Tempatan) Sdn. Bhd. for Employees Provident Fund Board (JF404))

0.8


p/s photo: Michelle Yip

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