Sunway Holdings

Sunway Holdings

Collaboration agreement with CCCC Second Harbour
Engineering Company (BUY; RM1.55 SGW MK; TP RM1.70)
Sunway Spun Pile (Zhuhai) Co. Ltd. (SSPZ), a 80%-owned
subsidiary of Sunway Global Limited which in turn is a
66.4%-owned subsidiary of Sunway, had on 7 August
2009, entered into a Collaboration Agreement with CCCC
Second Harbour Engineering Company Limited (CSHE) to
promote the usage of Pretensioned Spun High Strength
Concrete (PHC) piles manufactured by SSPZ.
The Collaboration Agreement entails CSHE promoting the
usage of PHC piles manufactured by SSPZ. In return, SSPZ
will commit to supply CSHE with quality PHC piles at
favourable terms. We are positive on this agreement given
the expected surge in demand on PHC following the RMB4
trillion stimulus package in China.

Also, CSHE has a strong reputation having constructed more
than 100 bridges and 200 ports all over China including the
iconic Sutong Yangtze River Bridge, Hang Zhou Bay Bridge,
Yantian Port Phase II and III, Shenzhen and the Yangkou
Port in Nantong, Jiangsu. It has also secured foreign projects
including Malaysia's Penang Second Bridge, Karachi
International Container Terminal Phase III, Pakistan and
Saigon International Terminals, Vietnam.
SSPZ has an annual production capacity of 400,000 tonnes
per annum which translates into a maximum revenue of
RM70m assuming an average selling price of 400 yuan. We
are conservatively projecting earnings from China to
contribute 5% of Sunway’s FY09 pretax profit rising to 8%
in FY11. We think there could be upside to our forecasts
depending on how this collaboration agreement pans out.
We reiterate our Buy rating and price target of RM1.70
which is based on our SOP value.

Also, CSHE has a strong reputation having constructed more
than 100 bridges and 200 ports all over China including the
iconic Sutong Yangtze River Bridge, Hang Zhou Bay Bridge,
Yantian Port Phase II and III, Shenzhen and the Yangkou
Port in Nantong, Jiangsu. It has also secured foreign projects
including Malaysia's Penang Second Bridge, Karachi
International Container Terminal Phase III, Pakistan and
Saigon International Terminals, Vietnam.
SSPZ has an annual production capacity of 400,000 tonnes
per annum which translates into a maximum revenue of
RM70m assuming an average selling price of 400 yuan. We
are conservatively projecting earnings from China to
contribute 5% of Sunway’s FY09 pretax profit rising to 8%
in FY11. We think there could be upside to our forecasts
depending on how this collaboration agreement pans out.
We reiterate our Buy rating and price target of RM1.70
which is based on our SOP value.