PP 7767/09/2010(025354)

27 August 2010
Corporate Highlights RHB Research

Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
R esults/Briefing No te Company No: 233327 -M

27 August 2010
MARKET DATELINE Sunrise Share Price : RM2.05
Getting More Aggressive Fair Value : RM2.88
Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (SUNRISE; Code: 6165) Bloomberg: SUN MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
June (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2010 590.7 134.0 27.0 (6.0) 7.6 27.8 5.8 0.9 13.0 33.6 2.4
2011f 754.0 148.1 29.9 10.6 6.9 32.7 9.9 0.8 12.8 30.3 2.0
2012f 888.0 164.5 33.2 11.1 6.2 34.4 8.5 0.7 12.7 29.1 2.2
2013f 1,070.2 188.9 38.1 14.9 5.4 - 10.2 0.7 13.1 28.2 2.6
Main Market Listing /Trustee Stock/ Syariah Approved Stock By The SC # Normalised * Consensus Based On IBES Estimates
RHBRI Vs. Consensus
Above
♦ Within expectations. Sunrise’s FY10 net profit of RM134m came in within In Line
our and consensus estimates. FY10 turnover fell 26.5%, mainly due to the Below
completion of Meridin as well as substantial recognition of MK 10 and Solaris
Dutamas in FY09. Future revenue will be supported by billings from MK11, Issued Capital (m shares) 495.4
Market Cap (RMm) 1,015.6
Dutamas and MK 28. As for the bottom-line, excluding the one-off gain on
Daily Trading Vol (m shs) 0.3
disposal of office space in Plaza MK and an Australian asset amounted to
52wk Price Range (RM) 1.72-2.65
RM19.4m recognised in FY09, FY10 core net profit dropped slightly by 2%. Major Shareholders: (%)
EBIT margin was higher, due to better product mix of higher-end properties, Casa Unggul Sdn Bhd 24.0
such as Residence and MK 11. A 5 sen final dividend was declared, Dato' Allan Lim Kim Huat 7.2
representing a yield of 2.4%. EPF 12.1

♦ Unbilled sales dropped slightly but not a concern. As at June 2010, FYE June FY11 FY12 FY13
unbilled sales stood at RM861m, dropped slightly by 5.1% from RM907m in EPS chg (%) (5.2) (0.6) -
Var to Cons (%) (8.6) (3.5) -
Apr 2010. The amount will underpin earnings until 2013, and margins will be
relatively high, as the contributors are MK 11 and MK 28. Going forward, PE Band Chart
Sunrise will launch Menara Solaris (office blocks) and its Canadian project in
4Q2010. Both projects have a combined GDV of RM1.6bn. PER = 12x
PER = 9x
♦ Risks. The risks include: 1) concentration risk as most of its existing projects PER
PER
=
=
6x
3x
are located in Mont Kiara; 2) competition from peers; 3) delays in launches
and approvals; and 4) country risk.

♦ Forecasts. After fine-tuning our assumptions for take-up rate and launches,
our FY11-12 earnings forecasts are adjusted slightly by -1% to -5%. We also
introduce our net profit estimate for FY13, with a bottom-line growth of 15%, Relative Performance To FBM KLCI
in view of the large number of property launches.

♦ Investment case. As we update the latest FY10 balance sheet, our fair FBM KLCI

value on Sunrise is raised to RM2.88 from RM2.76, based on an unchanged

discount rate of 30% to RNAV. Maintain Outperform. Sunrise

Joshua CY Ng
(603) 92802237
Please read important disclosures at the end of this report. joshuang@rhb.com.my

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Briefing Highlights

♦ RM6.6bn worth of new projects until 2011. Riding on the property upcycle, Sunrise is getting more
aggressive in its new property launches. A total of RM6.6bn GDV worth of projects will be launched progressively
from 4Q2010 to end 2011. These include: (i) Menara Solaris; (ii) Canadian project; (iii) Solaris 3; (iv) Jelutong –
together with Sime Darby; (v) Lot 149 Angkasaraya; (vi) Kajang; and (vii) MK 22.

Table 2: Projects in the pipeline

Projects GDV (RM mil) Tentative launch
Menara Solaris 508 Sept/Oct 2010
Canada 1,100 Sept/Oct 2010
MK 20 679 Early 2011
Solaris 3 1,594 Mid 2011
Jelutong (50% share) 483 Mid 2011
Lot 149 875 Mid 2011
Kajang 736 Mid 2011
MK 22 619 Late 2011
Total 6,594

Source: Company

♦ Venture into hospitality. Looking ahead, Sunrise plans to go into the hospitality segment, whereby its MK 20 and MK
22 projects will be developed into service apartments under sale and leaseback structure. Certain units of the blocks will
be allocated for long-term lease, seasonal stay and short-term stay. Plans are still preliminary, but the sale of the
projects could come with rental yield guarantee. With built-up area of less than 1,000 sqf, we believe the take-up will
not be too challenging.

♦ IFRIC 15 to be delayed. From our checks with a few developers, the adoption of the new accounting standard – IFRIC
15 will be delayed until 1st Jan 2012, from 1st Jul 2010 previously. While we expect the delay to have neutral impact on
property stocks prices, over the short term, developers’ earnings will continue to be smoother or less lumpy, as profit
recognition is based on completion method.

Risks

♦ Risks. The risks include: 1) concentration risk as most of its existing projects are located in Mont Kiara; 2)
competition from peers; 3) delays in launches and approvals; and 4) country risk.

Forecasts

♦ Aggressive property launches to support higher earnings growth. After fine-tuning our assumptions for
take-up rate and launches, our FY11-12 earnings forecasts are adjusted slightly by -1% to -5%. We also
introduce our net profit estimate for FY13, with a bottom-line growth of 15%, in view of the large number of
property launches.

Valuations and Recommendation

♦ Investment case. As we update the latest FY10 balance sheet, our fair value on Sunrise is raised to RM2.88
from RM2.76, based on an unchanged discount rate of 30% to RNAV. Maintain Outperform.

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Table 3. Sunrise Quarterly Results

FYE June (RMm) 4Q09 3Q10 4Q10 QoQ (%) YoY (%) FY09 FY10 YoY (%) Comments
Turnover 237.3 112.2 130.0 15.9 (45.2) 803.9 590.7 (26.5) Full year revenue was lower due to
completion of Meridin, MK 10 and
part of Solaris Dutamas. Key
earnings contributors for FY10
include MK 11, The Residence and
MK 28.
EBIT 55.9 32.8 52.8 60.9 (5.6) 210.9 185.2 (12.2) EBIT was higher in FY09, due to
gain on disposal of RM19.4m.
Net int inc/(exp) (1.9) (1.3) (2.1) 69.4 8.7 (4.4) (5.8) 31.9
Associates (0.3) (0.3) 1.6 >-100 >-100 (0.8) 1.4 >-100
Pre-tax profit 53.6 31.2 52.3 67.5 (2.5) 205.8 180.9 (12.1)
Taxation (10.4) (7.7) (14.5) 88.3 39.9 (49.4) (47.9) (3.1)
Minorities (0.1) 0.0 0.9 >+100 >-100 (0.2) 1.0 >-100
Net profit 43.1 23.5 38.6 64.4 (10.4) 156.2 134.0 (14.2)
Core net profit 43.1 23.5 38.6 64.4 (10.4) 136.9 134.0 (2.2) Excluding the RM19.4m disposal
gain from the sale of office space in
Plaza MK and an Australian asset in
FY09, FY10 net profit only dipped
by 2-3%.
Net EPS (sen) 8.7 4.8 7.8 64.2 (10.6) 27.6 27.0 (2.2)
Margins (%)
EBIT 23.6 29.2 40.6 26.2 31.4 EBIT margin expanded due to
contribution from higher margin
products such as Residence and MK
11.
Pretax 22.6 27.8 40.2 25.6 30.6
Net profit 18.2 21.0 29.7 19.4 22.7
Tax rate (19.4) (24.7) (27.8) (24.0) (26.5)

Table 4. Earnings Forecasts

FYE June (RMm) FY10 FY11F FY12F FY13F
Revenue 590.7 754.0 888.0 1,070.2
Operating profit 185.2 196.7 199.3 232.6
Interest expenses (5.8) (5.5) (5.5) (5.8)
PBT 180.9 197.6 219.5 252.5
Tax (47.9) (49.4) (54.9) (64.4)
Minority interest 1.0 (0.1) (0.2) (0.2)
Net profit 134.0 148.1 164.5 188.9
EPS (sen) 27.0 29.9 33.2 38.1
DPS (sen) 5.0 4.1 4.6 5.3
Source: Company data, RHBRI estimates

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Table 5: RNAV breakdown

NPV of
Property NBV (RM psf Estimated annual Mkt Value @ 10% Surplus Surplus
Investments Type NSA / bays / per bay) income (RM psf/bay) (RM psf/per bay) (RM mil) @ 10%
Solaris Dutamas Retail (sqf) 307,087 293.08 108.00 1080 241.65 219.69
Carpark (bays) 4,000 37,750.00 6,000.00 60,000.00 89.00 80.91
Solaris MK Retail (sqf) 17,611 567.83 108.00 1080 9.02 9.02
Carpark (bays) 1,800 19,444.44 6,000.00 60,000.00 73.00 73.00
Plaza MK Office (sqf) 89,653 178.47 108.00 1080 80.83 80.83

Total NPV of surplus (net of tax) 324.41

Area NBV NBV Mkt Value Mkt Value Stake Surplus

Landbank (acre) (RM mil) (RM/sqf) (RM/sqf) (RM mil) (%) (RM mil)
Kajang 57.96 131.28 52.00 58.00 146.43 100% 15.15
Seremban 257.60 151.37 13.49 20.00 224.42 50% 36.52
Mersing 431.08 20.30 1.08 4.00 75.11 100% 54.81
Canada 4.84 117.72 597.00 600.00 126.50 100% 8.78
Kuala Lumpur 3.40 186.01 1,255.96 1,750.00 259.18 100% 73.17
Mont' Kiara 77.40 314.00 93.13 300.00 1,011.46 100% 697.46
Bukit Jelutong 21.00 114.35 125.00 130.00 118.92 50% 2.29

Total land surplus (net of tax) 621.73

Total surplus for property investment and landbank (RM mil) 946.14
Add: Shareholders' equity (RM mil) 1,094.27
RNAV (RM mil) 2,040.41
No. of outstanding shares (mil) 495.37
RNAV per share (RM) 4.12
Target price (RM) - Discounted at 30% 2.88

IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

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 over a period of three months,
but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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