Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Tuesday, August 24, 2010

SUNCITY - Sunway City to be lighter and nimbler

Maintain buy at RM3.73 with target price of'' RM4.70: Results in line with expectations. 2Q2010 net profit ex-exceptionals came in at RM39 million (+50% year-on-year, -6% quarter-on-quarter). The leisure and hospitality segments reported stronger earnings before interest and tax (EBIT) y-o-y (school holidays & Middle East tourists, 4QFY2009 affected by Influenza A H1N1 outbreak), while property development saw a q-o-q decline due to completion of Sunway Giza commercial project. Interim dividend per share of 31 sen (4QFY2009: eight sen) with net yield of 6.2% (FBM KLCI: 2.8%), to reward shareholders post-REIT listing.

Robust physical sales of RM285 million (+239% y-o-y, +105% q-o-q), driven by Sunway Damansara Rymba Hills bungalows, Sunway SPK 3 Harmoni townhouses, Sunway Guanghao condos, and Sydney industrial lot sale. 1H2010 sales of RM424 million are on track to meet the RM1 billion 2010 target. Riding on robust demand, the launch target has been raised to RM1.76 billion with RM800 million slated for 2H2010, including Sunway Velocity (maiden launch of shopoffices & serviced apartments), South Quay condos, and Sunway Damansara (SOHO, shopoffices). Unbilled sales stood at RM743 million (twice FY2009 annualised property development revenue).

Stronger balance sheet post-REIT. The listing of Sunway REIT has helped to unlock value and provide a ready avenue for SunCity to monetise more of its investment properties in the future. REIT net proceeds of about RM500 million (after minority interest and RM780 million debt repayment) should come in handy for working capital and landbank replenishment. We raised FY2010-12F earnings by 8% to 25% to factor in acceleration in project launches and REIT impact (annual REIT dividend and management fees along with interest savings should help offset lower property investment contribution). SunCity will also recognise a RM530 million one-off gain on disposal in 3Q2010. ' HwangDBS Vickers Research, Aug 23

This article appeared in The Edge Financial Daily, August 24 2010.

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