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Thursday, November 4, 2010

UEM Land buying stake in Sunrise?

KUALA LUMPUR: UEM Land Holdings Bhd is believed to be acquiring a substantial stake in Sunrise Bhd following requests for a trading suspension of their shares today pending an announcement.

According to filings with Bursa Malaysia, UEM Land and Sunrise have requested for the trading suspension that started at 9am yesterday to end at 5pm today.

In separate statements, the companies each said it would announce a “corporate exercise”.

Datuk Wan Abdullah Wan Ibrahim is expected to give details today.

In its statements to the stock exchange, UEM Land said it had requested for a trading suspension pending a “material announcement on a potential corporate exercise”.

Attempts to get UEM Land to comment were unsuccessful while a Sunrise representative said the company was not able to disclose details of its material announcement.

Market talk has it that the acquisition by UEM Land would be made via a share swap. According to analysts, there could be share swap between the companies which eventually could result in UEM Land becoming a substantial shareholder in Sunrise.

Another analyst said there were lots of speculation in the market currently. He said the acquisition could result in UEM Land privatising Sunrise. “If so, I’d imagine that UEM Land will issue shares to buy into all of Sunrise. Whether it’ll be fair to minorities depends on the mechanices of the swap.”

However, it is not certain whether the deal will be a straight share swap or share swap with cash option to Sunrise shareholders.

It is unclear what price UEM Land will pay for Sunrise, whose share price has been on an uptrend since Oct 27.

According to Sunrise’s latest annual report, Casa Unggul Sdn Bhd is its single largest shareholder with a 24.41% stake. Casa Unggul is a company controlled by executive chairman Datuk Tong Kooi Ong. The Employees Provident Fund Board has 12.61% voting shares in Sunrise.

Analysts said Tong did not address the potential corporate exercise with UEM Land at Sunrise’s analysts briefing yesterday to announce its quarterly results.

In a media advisory yesterday, UEM Land said it was “set to embark on a mega corporate exercise” with details to be announced today by managing director/chief executive officer Datuk Wan Abdullah Wan Ibrahim.

UEM Group Bhd group managing director/chief executive officer Datuk Izzaddin Idris is also expected to be present at the briefing.

Sunrise closed at RM2.52, its highest in 12 months, prior to its suspension yesterday. The counter has gained more than 22% year-to-date.

UEM Land has appreciated more than 84% year-to-date. It closed at RM2.26 ahead of the suspension.

Meanwhile, Sunrise is upbeat on its prospects for the current financial year ending June 30, due to its substantial unrecognised revenue of RM863.8mil as at Sept 30.

“The profits from these projects will be recognised over the current and subsequent financial years. The group is planning to launch new residential and commercial projects in the near future in order to sustain longer term profits,” Sunrise said in the notes accompanying its results

Sunrise posted a slightly lower net profit of RM36.7mil for the three months ended Sept 30 compared with RM37.3mil a year ago.

In a filing with Bursa, Sunrise said its pre-tax profit surged to RM52.2mil from RM50.2mil and earnings per share fell to 7.41 sen from 7.52 sen before. It also announced an interim dividend of 26.67 sen per share less 25% taxation amounting to RM99mil or 20 sen per share.

Revenue for the period was lower at RM171.3mil from RM190.3mil a year ago.

“Despite lower turnover, higher pre-tax profits were achieved on the back of higher margins and lower operating costs for the quarter under review,” Sunrise said.

The main contributors to the group’s financial performance for the quarter were its ongoing residential and commercial developments.

ECM Libra head of research Bernard Ching said on an annualised basis, the first quarter results came in within market expectations but below the research house’s full year estimates as it expected subsequent quarters to report strong numbers.

He said this was backed by the unrecognised revenue of RM863.8mil as at Sept 30 and including the strong sales from its maiden project in Canada, Quintet, the unrecognised revenue would swell to RM1.22bil as at Oct 31.

“The net interim dividend of 20 sen came as a surprise but we believe this is non-recurring. Nonetheless, we believe the company may reinstate its previous dividend payout guidance of 35% which has been scrapped over the last three financial years in order to conserve cash amid the uncertain economic outlook then.

“As the net debt/equity ratio of the company has been reduced from 0.52 times in FY08 to 0.34 times in FY10, we expect the company to have greater financial capability to reward its shareholders going forward,” Ching said.

Another local analyst said Sunrise’s results were OK and there was no major surprise. However, he concurred with Ching that Sunrise’s project in Canada did exceptionally well and almost fully taken up.

“The dividend was indeed a surprise. We were only expecting FY11 dividiend to be 5.5 sen,” he said.

By The Star

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