SUNRISE : Upgrade to buy at RM2.12, revised TP RM2.80 (from RM1.98)

Sunrise glows beyond Mont’Kiara
 
Sunrise Bhd
(Oct 12, RM2.13)
Upgrade to buy at RM2.12 with revised target price RM2.80 (from RM1.98): The stunning sales performance of Sunrise’s recently-launched Canada project is a showcase of its ability to expand beyond Mont’Kiara. The project raises unbilled sales by 69% and makes Sunrise’s RM1.3 billion FY11 sales target more achievable. Unbilled sales could be further lifted by a RM480 million en bloc office sale, expected to be concluded by end-2010. We raise forecasts by 5% to 46% and realised net asset value (RNAV) by 0.9%. Our target price (TP) is raised to RM2.80, a 30% discount to RNAV.

Sunrise’s Quintet project in British Columbia marks a successful start to its overseas expansion. Phase 1 was fully sold within a month. Quintet has a gross development value (GDV) of RM1.2 billion at about RM1,730 psf. The size of the apartments ranges from 500 sq ft to 1,500 sq ft and the project will be developed in two phases. Given the strong sales recorded thus far, Sunrise will bring forward the launch of Quintet Phase 2. In our forecasts, we expect Quintet to contribute 4.3% to 28.1% of FY11/13 earnings before interest and tax (Ebit).

We understand that Sunrise is currently in talks with a local buyer for the en bloc sale of Menara Solaris (RM480 million initial GDV or RM818 psf; initially planned for strata office development). We are positive on these potential sales as it will reduce sales risks and enhance our forecasts by 5% to 11%.

We are upgrading Sunrise FY11/13 earnings forecasts by 5% to 46% to factor in changes in Quintet sales assumptions and profit recognition method as well as Menara Solaris GDV. Meanwhile, our estimated RNAV has been raised to RM4 per share (from RM3.97). We expect Ebit contributions from non-Mont’Kiara projects to increase from 4% (FY11) to 42% (FY13).

Sunrise is trading at an undemanding 7.2 times 2011 PER (against 11.3 times industry average), 4.1% and 47% discount to NTA and estimated RNAV/share, respectively. We believe lower concentration risk and better than expected sales thus far deserve a lower discount. We now value Sunrise at RM2.80 based on 30% discount to RM4 RNAV/share (from RM1.98, 50% discount to RM3.97 RNAV/share). Upgrade to “buy”. — Maybank IB Research, Oct 12


This article appeared in The Edge Financial Daily, October 13, 2010.