24 March 2010

PP 7767/09/2010(025354)
Malaysia Corporate Highlights
RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Com pany Upda te 24 March 2010

MARKET DATELINE

Sunway City Share Price

Fair Value
:
:
RM3.21
RM5.33
RM1.48bn Launches To Cash In On Property Upcycle Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (SUNCITY; Code: 6289) Bloomberg: SCITY MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2008# 1329.5 136.1 29.0 16.2 11.1 - 3.3 1.0 8.1 0.6 2.5
2009**# 1070.3 148.8 31.7 9.4 10.1 - 1.3 0.7 6.8 0.5 4.0
2010f 1361.6 163.4 34.8 9.8 9.2 33.0 5.9 0.7 7.1 0.5 2.5
2011f 1443.7 182.3 38.8 11.6 8.3 37.0 5.5 0.6 7.4 0.5 2.5

Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC #normalised **annualised * Consensus Based On IBES

♦ Ready to rock. Suncity is very well positioned to cash in on the current Issued Capital (m shares) 469.9
property upcycle. The company has lined up RM1.48bn worth of property Market Cap(RMm) 1,503.7
products for launching in FY2010, with a sales target of RM1bn (+144% Daily Trading Vol (m shs) 0.2
yoy from actual sales of RM410m in FY09). While seemingly aggressive, 52wk Price Range (RM) 1.44-3.50
Major Shareholders: (%)
we do share the company’s optimism that the target is achievable mainly
Tan Sri Dato’ Seri Dr 40.3
because of generally good locations of the products, the availability of Cheah Fook Ling
financing packages, and right pricing and target markets. Government of Singapore 21.4
Investment Corporation
♦ Bullish on three new projects. We are particularly excited over Sunway
SPK 3 Harmoni in Sunway SPK Damansara (3-storey townhouse project; FYE Dec FY09 FY10 FY11
launched by Apr 10), Sunway Rymba Hills in Sunway Damansara EPS chg (%) - - -
(leasehold zero-lot bungalow project; 2H10) and Sunway Velocity in cross Var to Cons (%) - 5.4 4.9
junction of Jalan Peel and Jalan Cheras in Kuala Lumpur (an integrated
PE Band Chart
commercial project comprising of service apartment, shop office and
shopping mall; 2H10), largely due to their strategic locations. Sunway SPK PER = 11x
PER = 9x
Damansara and Sunway Damansara are all established and highly sought- PER = 7x
after townships in the heart of the Klang Valley while Sunway VeloCity is PER = 5x

located only 10-15 mins away from KLCC. Already, Sunway SPK 3 Harmoni
has achieved 60% booking rate within few days during the soft launch last
week. The project which will be officially launched by next month has
clocked up about 700 registrants thus far.

♦ Forecasts. No change to our earnings forecasts for now. Given aggressive Relative Performance To FBM KLCI
property launches and improving property demand, we believe our FY10
revenue projection of RM627.5m for the property development division
(+74% yoy) is attainable. Potential surprises could come from further
Sunway City
revaluation gains arising from its hotel assets (which are currently under
the property, plant and equipment category) as well as better-than-
expected profit margins. As at Dec 09, the company had unbilled sales of
FBM KLCI
RM637m (or 1.0x of our FY10 revenue forecast).

♦ Risks. The risks include: 1) competition from peers; 2) delays in launches

and approvals; 3) rising raw material prices; and 4) country risk.

♦ Investment case. Our indicative fair value is maintained at RM5.33,

based on 15% discount to its RNAV of RM6.27. We are maintaining
Outperform rating on Suncity. Low Yee Huap, CFA
(603) 92802237
Please read important disclosures at the end of this report. low.yee.huap@rhb.com.my

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RM1.48bn Launches To Cash In On Property Upcycle

♦ Ready to rock. Our recent conversation with the company reaffirms our view that the company is very well
positioned to cash in on the current property upcycle. The company has lined up RM1.48bn worth of property
products for launching in FY2010 (see Table 2), with a sales target of RM1bn (+144% yoy from actual sales of
RM410m in FY09). While seemingly aggressive, we do share the company’s optimism that the target is highly
achievable mainly because of generally good locations of the products, and right pricing and target markets.
Already, it is almost a foregone conclusion that Sunway 3 Harmoni will be a complete sellout upon its official
launch next month.

♦ Good locations. Of the RM1.48bn new launches, we are particularly excited over Sunway SPK 3 Harmoni (3-
storey townhouses) in Sunway SPK Damansara, Sunway Rymba Hills (Zero-lot bungalows) in Sunway Damansara
and Sunway Velocity (integrated commercial development) at the intersection of Jalan Peel and Jalan Cheras in
Kuala Lumpur, largely due to their strategic locations. Sunway SPK Damansara, Sunway South Quay and
Sunway Damansara are all established and highly sought-after townships in the heart of the Klang Valley while
Sunway VeloCity is located only 10-15 mins away from KLCC.

♦ Sunway 3 Harmoni will be a sellout. For Sunway 3 Harmoni @ Sunway SPK Damansara (3-storey
townhouses), we believe the pricing, i.e. RM800k-1m per unit, is right for its target market, i.e. young working
couples/families. We believe the 180 units will be a complete sellout upon official launching next month.
Already, we understand that during the recent soft launch, the company managed to register 60% booking rate
for Sunway 3 Harmoni. In view of strong demand, the company has even decided to raise the selling price from
the initial RM800-850k to RM900k-1m per unit. The project has thus far clocked up about 700 registrants.

♦ Sunway Rymba Hills for “green and natural lifestyle”. For Sunway Rymba Hills, the key selling point is it
being the only residential development in Petaling Jaya with an exclusive 6.5-acre “private forest park”. This
19.4-acre gated and guarded bungalow project with selling prices from RM2.5m onwards features among others,
natural forest, extensive lawns landscaped with nature trails, meditation pavilions and exercise par courses. It is
also equipped with an infinity pool, gymnasium and a reading room in a clubhouse. Given the strategic location
(near to commercial centres include The Strand and Dataran Sunway) and right product (rising demand on gated
and guarded projects due to rising concerns on security), we believe this project scheduled to be launched in
2H10 will be well received by the market.

♦ Sunway VeloCity will do well too. We notice that there have been a number of new commercial, retail and
residential developments along the Jalan Peel/Jalan Cheras with varying degree of success. However, we believe
Sunway VeloCity will do well simply because: (1) It is an integrated development with residential, commercial
and retail components, that means to a certain extent, the project is self-sustaining; and (2) Suncity has had
proven track record in developing integrated projects, i.e. Bandar Sunway and Sunway Giza.

♦ Forecasts. No change to our earnings forecasts for now. Given aggressive property launches and improving
property demand, we believe our FY10 revenue projection of RM627.5m for the property development division
(+74% yoy) is attainable. The company has recently conducted asset revaluation exercises, which added
RM356.3m to its shareholders fund due to revaluation gain. We have factored in the gain into our RNAV forecast
(see report dated 1 Mar 10). Potential surprises could come from further revaluation gains arising from its hotel
assets (which are currently under the property, plant and equipment category) as well as better-than-expected
profit margins. As at Dec 09, the company had unbilled sales of RM637m (or 1.0x of our FY10 revenue forecast).

♦ Risks. The risks include: 1) competition from peers; 2) delays in launches and approvals; 3) rising raw material
prices; and 4) country risk.

♦ Investment case. Our indicative fair value is maintained at RM5.33, based on 15% discount to its RNAV of
RM6.27. We are maintaining our Outperform rating on the stock.

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 24 March 2010

Table 2 : Suncity’s 2010 property launches

Future projects Location GDV (RMm) Launch date Remarks

Sunway 3 Harmoni Sunway SPK 160 Apr10 180 units 3-storey townhouse
Damansara project; selling price is around
RM800k-1m/unit.
Sunway Rymba Hills Sunway 230 2H10 Leasehold; zero lot bungalow;
Damansara selling price from RM2.5m per unit
onwards (or average selling price
of RM600 psf).
Sunway Velocity Kuala Lumpur 280 2H10 Shop Offices, shopping mall and
service apartment project.
Sunway South Quay Bandar 200 1H10 242 units condominium project;
(Condominium) Sunway average selling price is RM450 psf.
Sunway Suria Shah Alam 40 2H10 Cluster home; from RM400k/unit
onwards.
Sunway Penang Penang 122 By phases Township development comprises
2-3 storey terrace houses and
semi-D.
Sunway City Ipoh Ipoh 59 By phases Township development; comprises
townhouse, shop office and villa.
Sunway Opus India 133 2H10 Mid-end condominium project; will
be launched by phases.
Sunway Guanghao China 106 1H10 Mid-end condominium project; will
be launched by phases.
Others 172 To be confirmed Still in planning stage.
Source: Suncity 1,480

Table 3. Earnings Forecasts

FYE Dec (RMm) FY08a FY09a^ FY10F FY11F

Revenue 1,329.5 1,605.4 1,361.6 1,443.7

Prop dev 699.5 541.8 627.5 667.3
Prop invt 216.8 410.5 277.2 304.9
Leisure 113.3 184.0 121.9 128.0
Hospitality 184.9 288.6 204.9 206.9
Healthcare 115.1 180.5 130.0 136.5
Operating profit 700.3 1,259.6 348.5 374.1
Prop dev 151.0 114.6 113.0 120.1
Prop invt 460.7 1,061.7 166.3 183.0
Leisure 30.5 35.3 24.4 25.6
Hospitality 52.9 52.0 41.0 41.4
Healthcare 5.2 -3.9 3.9 4.1
Interest expenses (76.9) (101.5) (107.5) (112.9)
PBT 637.8 1,212.2 346.7 367.0
Tax (167.8) (294.4) (83.3) (104.6)
MI (203.1) (354.6) (100.0) (80.0)
Net profit 136.1 563.2 163.4 182.3
Normalised net profit 136.1 223.2 163.4 182.3
EPS (sen) 29.0 119.8 34.8 38.8
DPS (sen) 8.0 13.0 8.0 8.0

^ 18-month results due to change in FYE

Source: Company data, RHBRI estimates

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Table 4: Computation of RNAV

Book Value
Development Properties Revalued (RM m) Surplus (RMm) SCB’s share (RMm)
(RM m)
Sunway Damansara 307.1 60.0 247.1 148.3
Sunway Palazzio 28.7 16.0 12.7 6.4
Sunway South Quay 423.2 230.0 193.2 59.9
Sunway Kayangan 7.0 5.0 2.0 2.0
Sunway SPK 183.0 35.0 148.0 74.0
Sunway Melawati 99.3 46.0 53.3 53.3
Sunway City Ipoh 202.8 61.0 141.8 92.2
Sunway Semenyih 145.8 121.0 24.8 17.4
Sunway City Penang 50.9 6.0 44.9 44.9
Sunway Grand 13.1 6.0 7.1 7.1
Sunway Crest 31.3 14.0 17.3 17.3
Sunway Cheras 7.0 3.0 4.0 4.0
Sunway Suria 50.5 30.0 20.5 10.3
Taman Duta 34.4 27.5 6.9 6.9
Bukit Rimau 19.9 0.0 19.9 19.9
Wonderland Sydney 129.2 5.0 124.2 19.0
Total 1,733.2 665.5 1,067.7 582.7

Hotels
Sunway Resort Hotel & Spa 346.1 267.0 79.1 41.2
Pyramid Tower Hotel 244.4 147.0 97.4 50.7
Sunway Hotel Georgetown 40.8 27.0 13.8 13.8
Sunway Hotel Seberang Jaya 42.4 30.0 12.4 12.4
Sunway Hotel Phnom Penh 31.1 31.0 0.1 0.0

DCF- Sunway Opus Grand Residency (WACC:

14.8%) 38.0
DCF- Sunway MAK- Maheswaram (WACC: 14.8%) 9.6

Revaluation surplus (RMm) 748.4

Shareholders funds @ Dec 09 (RMm) 2,197.7
RNAV (RMm) 2,946.0
Number of shares outstanding (m) 470.0
RNAV per share (RM) 6.27

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IMPORTANT DISCLOSURES

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Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
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Industry/Sector Ratings

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