Maybank IB Research. Sunway Berhad. Sunny disposition: Larger and leaner. Not Listed (target: by-end August 2011) Merger : New Listing 27 July 2011

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1 Maybank IB Research PP16832/01/2012 (029059) Merger : New Listing 27 July 2011 Not Listed (target: by-end August 2011) Share price: Target price: RM2.80 (issue price) RM3.85 (new) Wong Chew Hann, CA wchewh@maybank-ib.com (603) Wong Wei Sum, CFA weisum@maybank-ib.com (603) Description: One of the leading property and construction groups in Malaysia (new merged entity of Sunway City and Sunway Holdings). Reputable projects including Bandar Sunway township. is also the asset owner of SunREIT (37% stake; investment properties include Sunway Pyramid Shopping Mall, Pyramid Hotels, Sunway Tower and Putra Place), colleges, medical centre and theme parks. On top of that, has interests in quarrying, building materials manufacturing and trading. As at Mar 2011, it has RM2.4b outstanding orderbook (construction) RM1.7b unbilled sales (property). Information: Ticker: - Shares Issued (m): 1,288.6 Market Cap (RM m) at issue price: 3, mth Avg Daily Volume (m): - KLCI: 1, Major Shareholders: % Tan Sri Dato Seri Dr Jeffrey Cheah 45.0 GIC 12.5 NOTE: Sunway City (SCITY MK) and Sunway Holdings (SGW MK) shares and warrants will be suspended from trading on 2 Aug 2011 for the listing of. Sunny disposition: Larger and leaner Making waves., enroute to a Main Market listing, will rank 4 th in market value among the listed property developers. The group, an amalgamation of Sunway City and Sunway Holdings, will be leaner in group structure. Apart from a larger balance sheet which will open up more possibilities especially in overseas expansion, the merger will also allow synergies to be reaped to the tune of 1-2% of combined revenue over the next 2 years. The listing should re-rate the Sunway Group for its larger market value and shares trading liquidity. 13% net profit CAGR. Based on RM1.7b unbilled property sales, and RM2b outstanding construction order book, we forecast RM332m net profit in Our earnings forecasts imputed RM2.1b-RM2.9b property sales and RM1.2b-RM1.5b construction job wins p.a. over Property development will contribute 50% to group operating profit in 2011, property investment 19%, construction 23% and other businesses 8%. Besides cross-utilisation of property and construction expertise, combined administrative and treasury functions will result in cost savings, yet to be imputed into our forecasts. Growth strategy. Longer term plans are to continue on its overseas drive, while cementing a stronger foothold in the domestic market. In property development, 35% of its remaining RM14.5b GDV are located overseas, with China (22%) and Singapore (6%) being the core markets. 26% of its outstanding construction order book is in Abu Dhabi and Singapore. The construction business is competitive enough in India and Middle East. The trading business is already internationalised with 70% of its earnings derived from the overseas market. 37% upside via Sunway City, Sunway Holdings. We value Sunway Berhad at RM5.9b or RM3.85 per share based on sum-of-parts (SOP; fully diluted) before including merger synergies. Based on part share settlement for Sunway City and Sunway Holdings shareholders (20% cash, 80% shares), both stocks and their warrants offer 37% upside. We value the property development business on RNAV (land surplus and DCF), property investment on 7-10% cap rate, and construction and the other businesses on PERs. Our RM3.85 SOP valuation imply still fair 15x 2011 PER and 12.3x 2012 PER for the enlarged group. Summary Earnings Table FYE Dec (RM m) 18M09P 2010P 2011F 2012F 2013F Revenue 4, , , , ,341.2 EBITDA Recurring Net Profit Recurring Basic EPS (Sen) EPS growth (%) DPS (Sen) PER # EV/EBITDA (x) # Div Yield (%) # P/BV(x) # Net Gearing (%) ROE (%) ROA (%) Note: 18M09 and 2010P financials are proforma; # based on RM2.80 issue price Source: Maybank IB

2 Coming together Two becomes one. Sunway City s merger with Sunway Holdings under a new entity,, will see a finale this quarter with the listing of the latter on the Main Market (possibly in end-august). The exercise will create a group of: (i) RM23.7b in gross development value (GDV) and 2,198 acres in landbank for the property development business, and (ii) RM2b in outstanding order book for the construction business. will rank 4 th in GDV size, behind SP Setia (RM45b), UEM Land (RM31b) and IJM Land (RM27b), but ahead of MRCB (RM15b). Its market value will be RM3.6b, based on its RM2.80 issue price and RM5.9b at our SOP valuation (RM3.85 per share). Property developers: Market value vs. GDV Market cap (RM b) UEMLand (11.2b cap, 31.0b GDV) Mah Sing (2.0b cap, 12.4b GDV) Sunway Bhd (3.6b cap, 24.4b GDV) MRCB (3.2b cap, 15.2b GDV) IJMLand (3.8b cap, 26.8b GDV) SP Setia (7.0b cap, 45.2b GDV) GDV (RMb) Source: Companies, Maybank IB Sunway City-Sunway Holdings: Merger details Sunway City Offer price - Ordinary share RM5.10 (RM1.02 cash + RM4.08 via share) - Warrants RM1.29 (RM0.26 cash + RM1.03 via share) Sunway Holdings - Ordinary share RM2.60 (RM0.52 cash + RM2.08 via share) - Warrants RM1.50 (RM0.30 cash + RM1.20 via share) - Ordinary share RM2.80 issue price Free warrants Entitlement Tenure 1-for-5 shares 5 years Exercise price (RM) 2.80 What it means (for holders of every 1,000 shares) Sunway City (i) RM1,020 cash, (ii) 1,457 shares, (iii) 291 warrants Sunway Holdings (ii) RM520 cash, (ii) 743 shares, (iii) 149 warrants Status of merger Shareholders approvals received on 15 June 2011; Both Sunway City and Sunway Holdings shares and warrants will be suspended from trading on 2 Aug 2011 Source: Companies, Maybank-IB 27 July 2011 Page 2 of 16

3 Why merge? The merger will: Property Groups NAV Latest NAV (RM m) UEM Land 3.9 SP Setia 3.1 IGB IJM Land 1.8 MRCB 1.3 Source: Companies, Maybank IB (i) Create a balance sheet size of RM2.4b in total net asset value, which will place as number 4 in ranking among the listed property developers in Malaysia behind UEM Land (RM3.9b), SP Setia (RM3.1b), and IGB (RM3.1b). The enlarged balance sheet size will, in turn, enhance the group s resume in its overseas drive, especially in the bidding for sizeable construction and property development projects. Proforma group net gearing (end-2010) will be 0.57x, but we expect this to come off to 0.51x by end The internal target is to cap it at 0.5x. (ii) Strengthen the group s competitiveness via cross-utilisation of property and construction expertise from project design to implementation. This will, in turn, enhance product quality. Sunway Holdings has an experienced construction arm under 100%-owned Sunway Construction. Breaking the entity barrier will provide for better monitoring of quality with the construction arm s involvement at each stage of the property development works cycle. (iii) Create cost synergies with a direct flow to the bottomline. Sunway City is well known in property development, while Sunway Holdings also has a property arm largely via SunwayMas and it is involved in property developments in Singapore via 30%-owned associates. The merger will allow better utilisation of resources, paring down on duplications. Pooling the procurement and treasury functions will result in better discounts for raw materials and lower interest costs. Management has guided on synergies to the tune of 1-2% of revenue in the next 2 years. Based on the proforma 2010 revenue of RM3.13b, this could translate into RM30m-RM60m savings p.a.. Three core businesses. group will be streamlined under three core functions: (i) property (development and investment, hospitality and leisure), (ii) construction (including precast concrete), and (iii) investments (trading, manufacturing, quarry, healthcare). Some of the businesses categorised under investments may be divested later (RM95m identified under Sunway Holdings). We expect the property business to contribute 69% to group EBIT in 2011 (assuming a full year of merger), construction 23% and the other businesses 8%. : New look (corporate and core businesses) Jeffrey Cheah 45% SUNWAY BERHAD Govt of Singapore Investment Corp 12.5% INTEGRATED PROPERTY Property development Property Investment, REIT Hospitality Leisure CONSTRUCTION Design & build Building & civil Geotechnical Mechanical & electrical Precast concrete INVESTMENT Trading & manufacturing Quarry & building materials Healthcare Others Source: Company, Maybank IB 27 July 2011 Page 3 of 16

4 Management strength. s Executive Chairman will be Tan Sri Jeffrey Cheah (founder) while the President will be Dato Chew Chee Kin. The captains of each operating functions under Sunway City and Sunway Holdings are retained under : Mr Ho Hon Sang for property development (Malaysia, Singapore) Mr Ngian Siew Siong for property development (international) Dato Ngeow Yoon Yean for property investment Dato Jeffrey Ng for Sunway REIT Dato Tan Kia Lok and Mr Kwan Foh Kwai for construction Dato Tan Kia Lok for quarry Dato Yau Kok Seng for trading and manufacturing, and emerging businesses. In addition, some functions will be centralised, with Group Corporate Development to be helm by Ms Sarena Cheah (also executive director), and Group Finance under Mr Chong Chang Choong, the only relatively new name in the management team. Mr Chong joined Sunway City as Director of Group Corporate Affairs in Dec Proposed board of directors: Distinguished names Age Designation Resume Tan Sri Jeffrey Cheah 65 Executive Chairman Datuk Razman M Hashim 72 Deputy Executive Chairman An accountant by profession, Tan Sri founded the Sunway Group in 1974 A banker, Datuk was the Deputy Chief Executive of Standard Chartered Bank Malaysia from 1994 until his retirement in Jun 1999 Dato Chew Chee Kin 66 President An economics graduate, Dato joined Sunway Holdings in He is the current President of Sunway Holdings Lim Swe Guan 57 Independent, Non- Executive Director Datuk Paul Low 65 Independent, Non- Executive Director Wong Chin Mun 67 Independent, Non- Executive Director A property man, Mr Lim was Director of Jones Lang Wootton Australia and Managing Director of Singapore s GIC Real Estate Pte Ltd An accountant by profession, Datuk was the President of Federation of Malaysian Manufacturers (currrently Vice President), and President of the Transparency International Malaysia An accountant, Mr Wong was previously attached to Yeo Heap Seng and Nylex. Presently, he is a member of the National Barding Taskforce under the Ministry of International Trade and Industry Sarena Cheah 37 Executive Director An MBA holder, Sarena joined Sunway Group in 1995 and again in 2003 after she completes her MBA. She is presently the Director of Strategic & Corporate Development of Sunway City (since 2009). Source: Sunway Holdings circular to shareholders, 23 May July 2011 Page 4 of 16

5 Much abound Property development RM14.5b effective GDV. Combining the landbank of Sunway City with Sunway Holdings derive 2,198 acres with a GDV potential of RM23.7b. Considering just the group s effective interest in joint development projects derives RM14.5b in effective GDV (Jun 11). Of the RM14.5b, 65% is located in Malaysia with key projects comprising Sunway South Quay, Sunway Velocity and Sunway Penang. Another 22% is in China with one project each in Tianjin and Jiangyin. Singapore developments made up 6%, and these include Sunway Holdings 30% stake in five remaining projects, in joint venture with Singapore s Hoi Hup Group. Major property projects Land size (remaining acres) Devt period (remaining years) Total Effective GDV GDV (RM m) (RM m) Malaysia Sunway Damansara Sunway South Quay ,196 2,518 Sunway Melawati Sunway Integrated Resort Sunway Velocity ,315 1,657 Sunway City Ipoh more than years Sunway Penang ,203 1,203 Bukit Lenang, Johor Bahru Sunway Semenyih more than years Sunway Duta Casa Kiara III Others Sub-total 1, ,121 China Sunway Guanghao, China Tianjin Eco City, China ,344 3,206 Sub-total ,289 Singapore* The Toa Payoh , East (60% sold) , Yishun Tampines (2H 2011 launch) , Yuan Ching Rd (2H11 launch) Sembawang (2H 2011 launch) Sub-total ,693 Elsewhere Wonderland Business Park, Australia Sunway Opus Grand, India Sunway MAK Signature Residence, India Sub-total Total # 14,750 Note: * Sunway s 30% interest in the projects (except for Sembawang which is 100%); # As at March 2011 (RM14.5b as at June 2011) Source: Company 27 July 2011 Page 5 of 16

6 Overseas landbank (before including Singapore) Source: Company RM2.3b sales target for This includes s joint development projects, and is based on RM4.3b worth of launches for 2011 (2010: RM2.1b). As at Mar 2011, sales amounted to RM553b and these include: (i) RM192m from East, Singapore, (ii) RM107m from Wonderland Business Park, Australia, and (iii) RM60m from Sunway Nexis. The RM2.3b target represents a strong growth of 44% from 2010 s RM1.6b by both Sunway City (RM1.2b) and Sunway Holdings (RM0.4b). Unbilled combined sales stood at RM1.7b (SunCity: RM1.2b; Sunway Holdings: RM0.5b) as at Mar Sales trend Source: Company 2010 s revenue and unbilled sales 27 July 2011 Page 6 of 16 Source: Company

7 Positive enhancement from the MRT. 8 July ground-breaking for the Sg Buloh-Kajang (SBK) line by PM Najib is a significant milestone in cementing the government s commitment to the start of construction of the 51km alignment. is a major beneficiary, with two of its development projects located at the SBK line station stops: Sunway Damansara (RM826m remaining GDV; Dataran Sunway station) and Sunway Velocity (RM3.2b GDV; Cochrane station). The station stop proximity could enhance the development values further. Every 10% rise in the combined remaining GDV of these two projects could lift our RNAV estimates for by 2 sen per share. Riding on new MRT network Source: Company Investment properties to cushion earnings during downturn. These include the two colleges (Monash University Campus and Sunway University College), Sunway Giza Shopping Mall, hotels (Sunway Hotel Georgetown, Sunway Hotel Phnom Penh and Sunway Hotel Hanoi), Sunway Medical Centre, theme parks (Sunway Lagoon and Tambun) and a 37% stake in SunREIT, the owner of reputable Sunway Pyramid shopping mall (62% of SunREIT s total asset value). These assets will provide steady rental and dividend income (SunREIT RM64-70m dividend p.a. to the group) as well as property management fees to. We expect 17-19% of our EBIT forecasts for to come from this business segment. 27 July 2011 Page 7 of 16

8 Construction RM2b outstanding order book. This includes RM392m new jobs secured this year comprising the upgrading of Ipoh Airport (RM37m), Package 4 of Legoland Malaysia Theme Park in Johor (RM258m), Bio- Xcell central facilities utility in Johor (RM74m), and piling works at Jln Tun Razak, KL (RM22m). The concentration of job wins in the past 9 months have shifted towards domestic with 74% of the outstanding RM2b (Jun 2011) being jobs in Malaysia and 26% overseas (Abu Dhabi and Singapore). This compares with 57% overseas and 43% domestic jobs based on its outstanding order book as at Oct We estimate RM1.7b of the order book to be recognised this year. Sunway s construction order book (RM m) Contract value Jun 11 Expected completion Local Government office buildings, Putrajaya Q11 Precinct 1, Putrajaya (hotel, office) Q12 Impiana Hotel Q11 Sunway office tower (sub-structure) Q11 Sunway Velocity (shop offices, apartments) Q13 Dairy product factory in Port Klang Q11 Putrajaya P7 & P8 infra and gas district cooling plant GDC 4Q11; P7&P8 1Q12 UiTM campus expansion & KLCC link bridge Q 13 Legoland # Q12 Bio-Xcell central facilities utility # Q12 Others 351 Sub-total 1,460 (74%) Overseas Abu Dhabi Arzanah Rihan Heights * 1, Q11 Abu Dhabi Rihan Heights (MEP) Q11 Abu Dhabi Rihan Heights (stone & tiling) Q11 Abu Dhabi Al Reem Island (Zone C, E) Q11 Singapore Precast Sub-total 508 (26%) Total 1,968 # New in 2011; * Sunway has a 60% stake in the construction; Sources: Company, Bursa Sizeable tender book. New job wins was about RM900m in 2010, and the internal target is to replenish the order book by RM1.5b per annum. RM392m new jobs for 2011 year to-date has met 26% of its full-year target. The tender book stands at a sizeable rolling RM1.5b per month, and potential new jobs are expected to come from in-house property, 10 th Malaysia Plan and Economic Transformation Programme projects. Sunway Construction has participated in tenders of the Klang Valley LRT extension Package B and infrastructure works in SCORE, and the pre-qualification of the Sg Buloh-Kajang MRT line elevated works. Our forecasts have imputed RM1.2b job wins in 2011, RM1.5b in Rising up the rank. We know Sunway Construction as a lean construction group having started in the sub-contracting space and progressed far to offer an entire range of construction services: civil, structural, mechanical and electrical. It is experienced in both the domestic and overseas markets (India, Abu Dhabi and Singapore). Its past domestic jobs have largely been won through tenders. Within the new, Sunway Construction remains under the leadership of two veterans: Dato Tan Kia Lok and Mr Kwan Foh Kwai. With external jobs increasingly competitive, the construction arm will: 27 July 2011 Page 8 of 16

9 - Focus on higher margin speciality construction services like geotechnics and mechanical & electrical (M&E) works, - Build new business in project management consultancy (PMC) underpinned by the virtual design and construction (VDC) platform. The VDC platform, we understand, is driven by Dato Tan and it uses 5-D digital software to reduce design faults, construction costs and delays, and improve quality. The 5-D platform has been implemented in the the current Putrajaya Hotel construction job. The other businesses Quarry: Malaysia. will continue to operate 7 quarries and asphalt plants with a production capacity of 460k tonnes per month (one production shift). Its market share in the Klang Valley has been unchanged at 10% since Nationwide, its market share is 6%, and the longer term plan is to regain the number 1 position. Based on the year to-date monthly production of 315k tonnes and a RM25/tonne selling price for ¾ aggregates, we estimate that the Malaysian quarries are deriving a revenue of RM95m p.a.. Current off-take has been lower from about 440k tonnes per month in end-2009, but this has been offset by higher selling prices (RM22/tonne in end-2009). Quarry: Trinidad and Vietnam. The Trinidad quarry comes with a 5 +5 year contract (starting Jul 2008) to supply a minimum 5m tonnes of aggregates to the Government of Trinidad at predetermined prices, and with price adjustment clauses. At an average selling price of RM54/ tonne, the contract value is a minimum RM270m over 5 years. The Vietnam quarries meanwhile are located in Hatay (Hanoi) and Vung Tau (near Ho Chi Minh City) with a total production capacity of 210k tonnes per month (52% utilisation rate). The quarry operations contributed RM179m turnover and RM10.5m pretax profit in 2010 on extremely thin margin of 5.9%. Margins have been coming off from 20.7% in FYE6/08 (due to a lucrative Singapore contract) to 9.9% in 18M FYE12/09 and 5.9% in We expect the business outlook to remain challenging. Sunway s quarry operations Monthly production Monthly maximum (tonnes) production (tonnes) Rock reserve (mil tonnes) Malaysia via Sunway Quarry K Kangsar (Perak) 35,000 65, Rawang (Selangor) 40,000 60,000 8 Cheras (KL) 30,000 45, Kajang (Selangor) 100, , Paka (Terengganu) 35,000 65,000 N/A Melaka 35,000 60, Taiping 40,000 45,000 3 Total 315, ,000 Vietnam via Sunway Holdings (Vietnam) Hanoi 50,000 90,000 9 Vung Tau 60, ,000 9 Total 110, ,000 Trinidad via Sunway Construction (Carribean) Trinidad 55, , Source: Company 27 July 2011 Page 9 of 16

10 Building materials. The business comprises 3 sub-divisions: (i) pavers manufacturing, (ii) pipes manufacturing (vitrified clay pipes mainly for sewerage pipings), and (iii) wall panel manufacturing located in both Malaysia and China. In China, the group has two pavers manufacturing plant in Shanghai and Dongguan and a spun pile plant in Zhuhai. The operations contributed a RM10m loss in 2010, and in the four preceeding years, it was hovering at break-even levels. We do not expect meaningful contributions in the near-term. Trading and manufacturing. The business will focus on strengthening its brand, manufacturing partnerships and distribution channels. The inhouse brands are Sunflex and Totalrubber for hoses and fittings, and Suntrak for heavy equipment parts. In Anhui (China), the group produces track links and other heavy equipment parts (under a joint venture with DCF Trek of Korea), and hydraulic couplings and fittings. For the trading sub-division, the group distributes global brand names like Furukawa, Airman, SANY and Lonking for heavy equipment, among others. It distribution network is via 42 branches in 7 countries Malaysia, Singapore, Indonesia, Thailand, China, Australia and India with over 8,000 customers in 32 cities outside Malaysia. Trading and manufacturing has seen the fastest growth at a pretax profit CAGR of 33% over (16% turnover CAGR). It contributed a pretax profit of RM38m in 2010 on a turnover of RM482m. We have imputed a conservative 10% p.a. turnover growth assumption over the next 3 years on steady 8% EBIT margin. Sunway Global: Established footprint in China Four core businesses. Sunway Global is a 77% subsidiary of Sunway Holdings with the remaining stake held by Goldman Sachs Strategic Investments LLC (22%) and key employees of Sunway (1%). Except for property development undertaken separately by Sunway Holdings, Sunway Global replicates the group s core businesses in China: (i) geotechnical services, (ii) building materials production, (iii) industrial products manufacturing, and (iv) trading. Well positioned within China. The building materials (interlocking pavers) manufacturing started in 2006 in Shanghai and Dongguan. Since then, the group has also expanded its geographical reach to the other major cities of China Suzhou, Zhuhai, Tianjin, Guangzhou and Chengdu and the Anhui Province. With a presence in fast-expanding Chinese cities, the geotechnical services and building materials units should benefit from China s continuous construction programme, while industrial products and trading will ride on China s economic growth. Sunway Global s core operations Core operations Geotechical services Building materials (manufacturing) Industrial products (manufacturing) Trading Details Comprises: (i) tunnel boring, (ii) diaphragm wall, (iii) foundation and piling services. Have undertaken tunnel boring jobs in Shanghai and Suzhou. (i) Paver plants in Shanghai & Dongguan. (ii) Spun pile plant in Zhuhai, for port and shipyard projects. (i) Fittings and automotive parts in JV with Xin Long. (ii) Undercarriage parts in JV with DCF Trek (top 2 worldwide). The plants are based in Anhui Province. >800 customer base over major cities in China. Established presence in Shanghai, Tianjin, expansion to Guangzhou and Chengdu. Sunway Global could be the next engine of growth. Having sunk in a total CNY383m investment comprising CNY132m debt (35%) and CNY251m equity (65%), Sunway Global is expected to propel Sunway Holding s growth from Sunway Global reported a net loss of CNY10.6m in FY08 (Jun) and it broke-even in FY09 (Dec). The spun pile operations which started in 3Q09 were loss-making in 2009, but all the other operations were profitable. Source: Maybank IB, Company 27 July 2011 Page 10 of 16

11 Sunway Global s reach in China Tianjin (trading) Anhui Prov ince (fittings & auto parts plant, undercarriage assembly ) Chengdu (trading) Shanghai (pav er plant, trading) Guangzhou (trading) Dongguan (pav er plant) Zhuhai (spun piles plant) Macau (foundation & piling) Source: Maybank IB, Company Financials and valuations 13% net profit CAGR. Based on RM1.7b unbilled property sales and RM2b outstanding construction order book, we forecast RM332m net profit in 2011, RM402m in 2012 and RM443m in Our assumptions are RM2.1b new property sales in 2011 and RM2.9b in 2012, and RM1.2b construction job wins in 2011 and RM1.5b in Property will contribute 50% to group operating profit in 2011, investment properties 19%, construction 23% and the other businesses 8%. Management s forecast of savings to the tune of 1-2% of revenue could raise our 2012 net profit forecast by RM30m-RM60m (+8-15%). Net gearing of 0.51x by year-end. Proforma group net gearing (end- 2010) is 0.57x and we expect this to improve slightly to 0.51x by end- 2011, still relatively high compared to peers under our coverage of 0.3x average. This is mainly due to RM0.9b cash cost for its merger (20% of consideration in cash) and the high upfront gross development costs for Sunway Velocity shopping mall (we assume RM500m capex). However, we expect net gearing to improve to 0.27x by end-2012 on lower RM300m capex assumption and stronger cash flow from its Singapore projects. The group has internal net gearing cap of 0.5x. Dividend policy to come in later. We understand that has yet to formalise a dividend policy. Our forecasts however assume 20% payout of net profit taking a cue from Sunway City s unofficial payout policy of 20%. With support from its steady and stable rental income from SunREIT and investment properties, we expect higher payout from vs. Sunway Holdings 11-12% in FY July 2011 Page 11 of 16

12 Peers valuation summary Company Rec Share Price Valuations. Our target price of RM3.85 is based on sum-of-parts. We value the: (i) property development business on RNAV i.e. land surplus and discounted project cash flow ( % WACC), (ii) investment properties at 7-10% cap rates, and (iii) price-to-earnings multiples for construction (10x 2012), building material (10x) and trading (10x). At our RM3.85 TP, would trade on 15x 2011 earnings, and 12.3x This is not undemanding vis-à-vis its listed peers. Target Price EPS (sen) PE (x) DPS (sen) Div Yield (%) (RM) (RM) CY11 CY12 CY11 CY12 CY11 CY12 CY11 CY12 Glomac Buy Mah Sing Buy SP Setia Buy Sunway Buy Average (ex-sunway) Source: Maybank IB Initiate with a Buy on Sunway City, Sunway Holdings, with implied 37% capital gains. We like for its: (i) exposure in China and Singapore property markets which provide long-term growth to its property business; (ii) earnings profile which has a stable rental/dividend income base (from its investment properties) which provides a cushion against the cyclical construction and property development businesses; (iii) larger market capitalization and shares trading liquidity which form strong upward re-rating catalysts for the Sunway Group moving away the current Sunway City-Sunway Holdings structure. Our RNAV implies 37% upside potential for all the existing 4 investment instruments: the mother shares of Sunway City and Sunway Holdings, and their respective warrants. Free float of Sunway vis-à-vis large cap property players RM m freefloat (LHS) freefloat (RHS) 4,000 3,500 3,000 2,500 2,000 1,500 1, % UEMLANDSP SETIA MRCB IGB SUNWAY KLCCP IJMLAND 0 Sources: Bloomberg, Maybank IB 27 July 2011 Page 12 of 16

13 Sunway - Suncity (via Sunway Bhd share + cash) Sunway Bhd issue price (RM/sh): 2.80 Sunway SunCity Sunway- WC SunCity- WA Share 26 July 2011 (RM/sh) Less: cash distribution Share price ex-cash distribution = a Exchange ratio (no. of Sunway/Suncity shares and warrants in exchange for one Sunway Bhd share) = b Implied entry cost to Sunway 26 July 2011 (RM/sh) = a x b Sunway Bhd's RNAV (RM) Upside (%) Other details on merger: Offer price (RM/sh) (for existing Sunway, SunCity shares & warrants) Share funded portion (RM/sh) The offer: On 25 Nov 2010, Sunway S/B offered to acquire SunCity s and SunHoldings entire businesses via Sunway Bhd shares (also 1 free warrant for every five Sunway Bhd shares) and cash. The deal values SunCity at RM5.10/sh, SunHoldings at RM2.60/sh, SunHoldings-warrant at RM1.50/sh and SunCity-warrants at RM1.29/sh. 80% of the offer prices will be settled via Sunway Bhd shares and 20% will be paid in cash. The issue price for Sunway Bhd shares is RM2.80/sh. Source: Company, Maybank-IB 27 July 2011 Page 13 of 16

14 Sunway Bhd's RNAV estimates 1. Landbank - MARKET VALUE Stake Acres MV BV Surplus (RMm) (RMm) (RMm) Sunway Semenyih 70% (14.3) Suncity Ipoh 65% Sunway Integrated Resort 100% Sunway Tower KL 1 100% Sunway JB, Bukit Lenang 80% Tmn Equine 100% Sg Long Balakong 80% Mont Putra Rawang 100% Sub-total: Development projects - DCF (WACC: %) Stake RMm Casa Kiara 2 78% 1.3 South Quay 60% Sunway Cheras 100% 1.8 Sunway Damansara 60% 85.6 Sunway D' Mont Kiara 88% 36.2 Sunway Monterez 100% 0.0 Sunway Kayangan 100% 4.5 Sunway Duta 100% 28.3 Bangi 100% 5.8 Sunway Melawati 100% 49.9 Casa Kiara III 80% 15.6 Sunway SPK 50% 0.0 Sunway Palazzio 50% 4.4 Sunway Alam Suria 50% 5.7 Sunway Velocity 50% Penang projects 100% Sunway Guanghao, China 65% 11.8 Tianjin Eco City, China 60% Wonderland Business Park, Australia 31% 14.7 Singapore Yi Shun 30% 19.6 Singapore Tampines 30% 23.2 Singapore Yuan Ching Road 30% 19.9 Singapore Sembawang 100% 6.1 East, Singapore 30% 25.7 Singapore The Toa Payoh 30% 27.6 Sub-total: 1, Investment properties - MARKET VALUE Stake MV BV Surplus (RMm) (RMm) (RMm) Monash University Campus 100% Sunway University College 100% Sunway Giza (shopping mall) 60% Sunway Hotel Georgetown 100% (44.4) Sunway Hotel Phnom Penh 52.5% (3.1) Sunway Lagoon Theme Park 100% Lost World of Tambun 65% Sunway Medical Centre 80% (100.3) Sunway Hotel Hanoi 100% (31.8) Sub-total: (71.9) 4. Other businesses or assets 36.6% stake in SunREIT based on Maybank IB's RM1.18 TP Construction (10x 2012PER) Building material (10x 2012PER) Trading (10x 2012PER) Grand total: 2,530.8 Shareholders fund (RMm) - Dec ,697.0 Warrants conversion (RM2.80 exercise price; expiring 2016) RNAV (RMm) 5,949.4 Number of shares (m shares) 1,288.6 Enlarge share capital post warrant conversion 1,546.3 FD RNAV/share (RM) 3.85 Source: Company, Maybank-IB 27 July 2011 Page 14 of 16

15 INCOME STATEMENT (RM m) BALANCE SHEET (RM m) FY Dec 2010P 2011F 2012F 2013F FY Dec 2010P 2011F 2012F 2013F Revenue 3, , , ,341.2 Fixed Assets 1, , , ,672.0 EBITDA Other LT Assets 2, , , ,017.7 Depreciation & Amortisation - (29.6) (43.7) (51.4) Cash/ST Investments Operating Profit Other Current Assets 2, , , ,341.8 Associate Total Assets 7, , , ,799.9 JV companies Interest (Exp)/Inc (74.2) (43.3) (37.2) (30.3) ST Debt , Exceptional Items Other Current Liabilities 1, , , ,978.6 Pre-Tax Profit LT Debt 1, Tax (133.7) (152.2) (167.6) Other LT Liabilities ,289.3 Minority Interest (309.2) (69.4) (54.9) (60.1) Minority Interest Net Profit Shareholders' Equity 2, , , ,484.7 Net Profit Ex. El Total Capital 7, , , ,799.9 Revenue Growth % EBITDA Growth (%) Share Capital (RM 'm) 1, , , ,288.6 EBIT Growth (%) - (27.5) Net Debt/ (Cash) 1, , , Net Profit ex-ei Growth (%) Working Capital 1, ,402.2 Tax Rate % Gross Gearing % Net Gearing % CASH FLOW (RM m) RATES & RATIOS FY Dec 2010P 2011F 2012F 2013F FY Dec 2010P 2011F 2012F 2013F Profit before taxation EBITDA Margin % Depreciation Op. Profit Margin % Net interest receipts/(payments) Net Profit Margin % Working capital change - (166.2) 1.9 (7.9) ROE % Cash tax paid - (133.7) (152.2) (167.6) ROA % Others Net Margin Ex. El % Cash flow from operations Dividend Cover (x) Capex - (500.0) (300.0) (300.0) Interest Cover (x) Disposal/(purchase) Asset Turnover (x) Others Asset/Debt (x) Cash flow from investing 2,035.0 (416.8) (213.3) (214.3) Debt/ EBITDA (x) Debt raised/(repaid) Debt/ Market Cap (x) Equity raised/(repaid) - (905.8) EV/EBITDA (x) Dividends (paid) (66.3) (80.4) Others - (58.7) (52.6) (45.7) Cash flow from financing (2,265.9) (964.5) (118.9) (126.0) Change in cash (1,058.7) Source: Company, Maybank IB 27 July 2011 Page 15 of 16

16 Definition of Ratings Maybank Investment Bank Research uses the following rating system: BUY Total return is expected to be above 10% in the next 12 months HOLD Total return is expected to be between -5% to 10% in the next 12 months SELL Total return is expected to be below -5% in the next 12 months Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax Disclaimer This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each security s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. 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Published / Printed by Maybank Investment Bank Berhad (15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, Kuala Lumpur Tel: (603) ; Fax: (603) Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof Kuala Lumpur Tel: (603) ; Fax: (603) July 2011 Page 16 of 16