SUNWAY CITY (RM1.46) - BUY
Still decent
Within expectations
Suncity’s 2QFY09 results came in within our expectations. On q-o-q basis, turnover and net earnings fell 13% and 21%, respectively. The lower turnover was due to slower sales and delay in construction progress of certain projects in the property development segment. However, bottom line was hit by additional depreciation charges arising from reclassification of “non-current assets classified as held for sale” to “property, plant & equipment” and “investment properties”. Depreciation that relate to the previous 3 quarters (i.e. 3Q and 4QFY08 and 1QFY09) was also charged out in 2QFY09. This amounted to RM21.5m in total. Excluding this impact, net profit actually improved by about 5% in 2QFY09. No dividend was declared for the quarter.
Stable EBIT margin
EBIT margin decreased to 25% from 34% in last quarter. This was due to the reason mentioned above. However, excluding the additional depreciation charges, EBIT margin still stayed at a healthy level of about 32%. This was largely held up by stronger margin for its property investment segment.
Property investment showing some weakness
2QFY09 turnover for Suncity’s property development segment still showed some improvement compared to last quarter. However, revenue for its property investment division showed some marginal weakness. We believe this was due to weakening consumer sentiment, and hence affected retail sales for its Sunway Pyramid mall. Bottom line impact was mitigated due to the better margin for its property investment segment.
Maintain BUY, with a TP of RM2.00Within expectations
Suncity’s 2QFY09 results came in within our expectations. On q-o-q basis, turnover and net earnings fell 13% and 21%, respectively. The lower turnover was due to slower sales and delay in construction progress of certain projects in the property development segment. However, bottom line was hit by additional depreciation charges arising from reclassification of “non-current assets classified as held for sale” to “property, plant & equipment” and “investment properties”. Depreciation that relate to the previous 3 quarters (i.e. 3Q and 4QFY08 and 1QFY09) was also charged out in 2QFY09. This amounted to RM21.5m in total. Excluding this impact, net profit actually improved by about 5% in 2QFY09. No dividend was declared for the quarter.
Stable EBIT margin
EBIT margin decreased to 25% from 34% in last quarter. This was due to the reason mentioned above. However, excluding the additional depreciation charges, EBIT margin still stayed at a healthy level of about 32%. This was largely held up by stronger margin for its property investment segment.
Property investment showing some weakness
2QFY09 turnover for Suncity’s property development segment still showed some improvement compared to last quarter. However, revenue for its property investment division showed some marginal weakness. We believe this was due to weakening consumer sentiment, and hence affected retail sales for its Sunway Pyramid mall. Bottom line impact was mitigated due to the better margin for its property investment segment.
No changes in our estimates and likewise our BUY recommendation and target price of RM2.25. Our valuation is based on a 60% discount to our RNAV estimate, which implies a PE multiple of 6.2x against our CY09 EPS forecast. We think our forecasts are reasonable, as we already factored in slower property sales as well as slightly weak earnings from property investment (for Sunway Pyramid mall). However, we cut our DPS forecast slightly as we think the company will conserve more cash due to the prevailing economic downturn
More downside pressure expected soon…
♦ After falling below the RM1.07 level in Aug 2008, the share price of E&O constantly encountered strong selling momentum and drifted to below the RM0.54 in late Oct 2008.
♦ The stock staged a technical rebound to rechallenge the RM0.74 technical hurdle in Nov, but reversed and hit a lower low of RM0.395 in late Dec.
♦ There was another rebound in Jan 2009, but the stock’s upside momentum was weak.
♦ Since then, it fell into a declining trend and drifted lower in recent trading.
♦ The 10-day SMA has also recently cut below the 40-day SMA, pointing to a possible medium-term bearish scenario on the stock.
♦ As it has just fallen below the RM0.54 support level and coupled with the downbeat momentum readings on the indicators, more downside pressure is expected.
♦ If the negative momentum persists, the stock is likely to ease lower towards the Dec 2008’s low of RM0.395.
♦ It will be a fresh multi-year low if that final support level gives way.
Technical Readings:
♦ 10-day SMA: RM0.547
♦ 40-day SMA: RM0.5755
♦ Support: IS = RM0.395♦ Resistance: IR = RM0.54 R1 = RM0.74 R2 = RM0.92
♦ After falling below the RM1.07 level in Aug 2008, the share price of E&O constantly encountered strong selling momentum and drifted to below the RM0.54 in late Oct 2008.
♦ The stock staged a technical rebound to rechallenge the RM0.74 technical hurdle in Nov, but reversed and hit a lower low of RM0.395 in late Dec.
♦ There was another rebound in Jan 2009, but the stock’s upside momentum was weak.
♦ Since then, it fell into a declining trend and drifted lower in recent trading.
♦ The 10-day SMA has also recently cut below the 40-day SMA, pointing to a possible medium-term bearish scenario on the stock.
♦ As it has just fallen below the RM0.54 support level and coupled with the downbeat momentum readings on the indicators, more downside pressure is expected.
♦ If the negative momentum persists, the stock is likely to ease lower towards the Dec 2008’s low of RM0.395.
♦ It will be a fresh multi-year low if that final support level gives way.
Technical Readings:
♦ 10-day SMA: RM0.547
♦ 40-day SMA: RM0.5755
♦ Support: IS = RM0.395♦ Resistance: IR = RM0.54 R1 = RM0.74 R2 = RM0.92
Attn : This article is contributed by courtesy of Blogger diamond
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