Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly, on December 21 - 27, 2015.   

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ELEVEN years after it was privatised, Sunway Construction Group Bhd (SunCon), the construction outfit of Sunway Bhd, made a comeback to Bursa Malaysia on July 28.

It is worth noting that SunCon is the second largest initial public offering (IPO) of the year after Malakoff Corp Bhd. It had a market capitalisation of RM1.55 billion at the time of listing and the IPO proceeds were RM478 million.

Given that it was a sizeable deal that has attracted international investors, the landmark relisting of SunCon was selected as the best IPO of The Edge’s Best Deals of the Year 2015. The counter has outperformed the FBM KLCI by 20%.

RHB Investment Bank (RHB IB), which structured the deal, says the oversubscription of SunCon shares being offered to institutional and selected investors and public investors reflects investor confidence in the builder’s solid fundamentals and future prospects.

RHB IB was the sole principal adviser, joint bookrunner and joint underwriter for this IPO. The bookbuilding tranche offered to institutional and selected investors was oversubscribed 4.6 times while the public portion was oversubscribed 2.66 times.

Year to date, SunCon, which is the country’s largest pure play construction company by revenue, has secured RM2.2 billion worth of projects. It has an outstanding order book of about RM4.3 billion that will keep the company busy over the next three years.

“It is supported by fresh bargain hunting for construction stocks on the back of Budget 2016, as infrastructure spending is one of the key focus areas,” says RHB IB.

On its market debut, SunCon’s share price hit a high of RM1.32, 10% above its IPO price of RM1.20. The counter rose to its peak of RM1.44 on Dec 3. At the closing price of RM1.42 last Wednesday, the company has a market capitalisation of RM1.83 billion.

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Astramina Advisory Sdn Bhd, which nominated the listing for Best IPO, highlights that SunCon’s share price closed at about a 15% premium as at Dec 8, compared to its listing price.

The local advisory firm, which is headed by managing director Wong Muh Rong, says the IPO has rewarded existing shareholders of Sunway Bhd by distributing about 175 million SunCon shares to entitled shareholders by way of dividend-in-specie.

Sunway retained a controlling stake of more than 54% in SunCon after the listing.

In the nine months ended Sept 30, 2015 (9MFY2015), SunCon reported a net profit of RM97.8 million, on revenue of RM1.44 billion. The construction segment contributed RM1.24 billion in revenue and a profit before tax of RM53.1 million, while the precast segment recorded revenue of RM200.2 million and PBT of RM56.9 million.

UOBKayHian initiated coverage on SunCon in a Dec 10 research note with a “hold” rating and a target price of RM1.40.

“We like SunCon for its diverse construction capabilities, for being able to handle both general and specialist jobs, as well as its good track record and strong outstanding order book,” it says.

SunCon is one of the key beneficiaries of the high infrastructure development spending in Malaysia, says the research team, adding that a good entry price is RM1.25.

 

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