Sunrise Bhd
(Sept 14, RM2)
Recommend outperform at RM2 with target price of RM2.32: We recommend “outperform” with our target price at RM2.32 ascribing forward PER of seven times and EPS of 33 sen. We had scaled down our forecast for FY2011 and FY2012 by 13%-20%, underpinned by cautious demand for Mont Kiara high-end condominiums and Kuala Lumpur office buildings. We project a slowdown in sales of MK28 and weaker demand for Solaris KL which is scheduled to be launched in September or October.
As at 4QFY2010, unbilled sales stand at RM861 million, of which 62% comes from MK11, while 37% from MK28 and 1% from other projects. Unbilled sales of RM681 million are the lowest over the past four financial years. Nonetheless, we expect the higher earnings registered in FY2010 to sustain as the bulk of the unbilled slaes are from a product mix of higher margin developments. In the near term, unbilled sales replenishment pivots on ongoing sales of MK28 which was 50% sold as at June. Sunrise achieved sales of RM98 million, mainly from MK28 in July and August CY2010. RM63 million out of the RM98 million are pending finalisation of sales and purchase agreements.
Sunrise has diversified its property development lead by two main pipeline projects that are scheduled for launch in September/October; (i) Menara Solaris, a Grade A office development with gross development value (GDV) of RM508 million. The development will offer net sales area of 600,000 sq ft on a strata basis; and (ii) Canada Richmond project that comprises apartment units with a small portion of retail properties. Pricing at C$500psf is at a discount by about 6% to 8% to the market price. The development margin of around 20% turns out to be slightly lower than Sunrise’s existing development. Other projects in the pipeline in CY2011 are: (i) MK20; (ii) Solaris 3; (iii) Jelutong JV; (iv) Lot 149; (v) Kajang; and (vi) MK22. Sunrise’s aggressive schedule of launches with total GDV of RM6.59 billion spanning FY2011-FY2012 is drawn based on its strong optimism over the property
market. — Inter-Pacific Research, Sept 14This article appeared in The Edge Financial Daily, September 15, 2010.
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