Go-ahead for Sunway merger

High on its post-merger to-do list will be expanding big into China and Singapore as it expects these two countries to contribute 30 per cent to its earnings by 2015.
PETALING JAYA: The proposed merger of Sunway City and Sunway Holdings got the green light from minority shareholders yesterday, and the new bigger Sunway Bhd (Sunway) is expected to be listed on Bursa Malaysia in the third quarter.

High on its post-merger to-do list will be expanding big into China and Singapore as it expects these two countries to contribute 30 per cent to its earnings by 2015.

"The larger group will allow us to realign our investor base and renew fo-reign investors' interest, and an improved and stronger perception of the brand internationally," said its founder and executive chairman Tan Sri Dr Jeffrey Cheah.

Speaking after both companies' extraordinary general meetings, he said Sunway expects to see more suitors from India and Viet-nam who have always been interested in its success in developing Bandar Sunway into "what we believed as the most integrated township in the region, if not the world."

"But our focus will be in the two premium markets of Singapore and China," he said.

With the merger, Sunway will have assets worth RM2 billion, landbank size of 880ha with total gross development value of about RM25 billion, construction order book of RM2.4 billion, and a potential market capi-talisation of over RM3.5 billion.

Currently, 65 per cent of its landbank is in Malaysia, followed by China (22 per cent) and Singapore (6 per cent).

Cheah said following the EGMs, Sunway Holdings and Sunway City will seek court approvals for a capital reduction and repayment exercise, after which the Sunway prospectus will be issued.

He said the issue price of RM2.80 represents a price-earnings ratio (PER) of 11.72 times and 14.02 times respectively and "based on our business strategies and future plans and prospects, there may be potential upside to the PER."

"Our peers in the property and construction sector are currently trading at an ave-rage PER of 19.11 times and if we apply the same PER Sunway's share will trade at about RM3.82 to RM4.58," said Cheah.

He added that Sunway expects to benefit from merger synergies of about 1 to 2 per cent of the overall re-venue. The group pro forma revenue last year was RM3.13 billion.

Cheah also said that in the pipeline is a teaching hospital next to the Sunway Medical Centre but it is still in the planning stage.

"We are developing a business model for this and there is no rush because we want to do it properly and be internationally recognised."

Asked if Sunway plans to launch a project under the Economic Transformation Programme, he said the company will announce a big project sometime this year.