KUALA LUMPUR (May 7): Sunway Bhd’s executive chairman Tan Sri Jeffrey Cheah converted 1.4 million units of warrants on April 30 before the ex-date for distribution of shares in Sunway Construction Group Bhd, in tandem with the latter’s listing exercise on Bursa Malaysia.

A filing with Bursa Malaysia today reveals Cheah had exercised the warrants at RM2.50 per share, translating into approximately RM3.5 million in total.

Cheah converted the warrants through his investment vehicle Sungei Way Corporation Sdn Bhd, bringing his shareholding in Sunway (fundamental: 1.5; valuation: 1.8) to over 985.57 million shares or 56.35% stake.

The warrants has a tenure of five years, maturing on Aug 17, 2016, and was issued on a one-for-five basis on Aug 18, 2011.

To reward shareholders, Sunway has undertaken an exercise to distribute Sunway Construction shares as dividend in specie.

In a note dated May 6, MIDF Research said next catalyst would be the distribution of special dividend after the IPO.

“It was mentioned in Sunway's circular to shareholders that the board will propose the declaration of a special cash distribution, subsequent to the proposed listing of SCG. The amount will be between 22 and 25 sen, subject to proceeds to be raised from the proposed offer for sale," MIDF said.

MIDF has reduced its target price on Sunway to RM3.86, subsequent to the ex-date of the share distribution. The revision was based on the initial public offering (IPO)’s indicative offer price of RM1.10 per share, and a one-for-ten distribution basis.

Sunway’s share price has drifted lower over the past three days to RM3.36, from the peak of RM3.76 on Monday to RM3.36 yesterday (Wednesday, May 6). Some 3.84 million shares were traded yesterday.  

Alliance DBS Research however downgraded Sunway to a hold call, as it sees limited upside on Sunway.

“We continue to like Sunway for its superior and unrivalled ‘build-own-operate’ model, but there is limited upside potential as the share price has rallied 13% since our February update,” the research house said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)