Sunway’s approvals from Bursa Malaysia exceed expectations

KUALA LUMPUR: Sunway Bhd's (Sunway) approvals from Bursa Malaysia have come in ahead of analysts' expectations.

As per a filing on Bursa Malaysia, Sunway had gained approvals for the listing of up to 2,804,471,128 bonus shares to be issued pursuant to the proposed bonus issue of shares; admission to the Official List and the listing and quotation of up to 631,006,003 warrants to be issued pursuant to the proposed bonus issue of warrants; and listing of up to 631,006,003 new Sunway shares to be issued pursuant to the exercise of the warrants.

While the research arm of Hong Leong Investment Bank Bhd (HLIB Research) did not expect any hiccups in Sunway's proposed bonus issues of shares and warrants, the approvals came in ahead of its expectations, especially involving the first-ofits-kind step-down mechanism on warrant exercise price.

With the above approvals, HLIB Research expected the group likely to hold an extraordinary general meeting (EGM) in August to secure shareholders approval before finalising the ex-dates and exercise price of the free warrants, based on five-days volume weighted average market price (VWAMP).

“Judging from the fast turnaround, we can expect the exercises to be completed before end of September,” the research arm said.

HLIB Research thus reiterated its ‘buy' call as the above approvals will serve as strong share price support reinforced by long term re-rating value play given Sunway's diversified income stream and recent reclassification under trading or services sector.

“Besides, potential assets unlocking worth up to RM1.4 billion and the potential spin-off of growing healthcare business which could eventually fetch more than RM3 billion are the other catalysts,” it said.

HLIB Research also maintained its target price of RM5.04 per share, which was derived based on sum of parts (SOP) derived valuation with a 10 per cent holding discount.

Overall, Sunway remained the research arm's top pick within the sector as HLIB Research believed it should be rerated and trade closer to its peers such as IJM Corporation Bhd and Gamuda Bhd given the group's diversified income stream and declassification from property sector.

At a price earnings ratio (P/E) of 13.6-fold as compared to peers, the research arm opined that Sunway represents a deep value stock with potential assets unlocking and growing healthcare business which are underappreciated.