Them Sunrise Projectiles!

My Dearest Moo Moo Cow,

Let's look at Aseambankers projections again.



Now I am extremely lucky enough to have a saved copy of OSK report on Sunrise. See, I want to put this 154.9 million into some sort of perspective.

Back in Aug 2004, OSK projected earnings of 141.7 million for Sunrise in 2006. Sunrise had that huge funky provision back for its fiscal year 2006. Anyway, current nine month year to date fy 2007, Sunrise only managed 72.7 mil.



Ok, we can say that OSK is extremely powder-full with their earnings projections as expected.

Ok that was then. In Dec 2006, OSK report projected a net profit of only around 142 million for Sunrise fy 2008. LOL!! 2 years later, OSK is still using the same projected earnings for Sunrise? See table below.



And the following table is from RHB's research report dated 18th April 2007. RHB projected Sunrise to achieve a net profit of 134.4 million for its fy 2008.



Now if you thought Aseambankers was extremely optimistic, then how about HDBS research report on 18th April? HDBS projected an earnings of 190.7 million for Sunrise's fy 2008! WOW!!!




Yeah! I know what exactly you are thinking. Tell me more about it, my dearest!

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Aseambankers on Sunrise

My Dearest Moo Moo Cow,

I just on the Edge website that Aseambankers Research raises Sunrise's TP to RM4.50. I find so amusing the way the brokers raises the target price of a stock by raising the forecasted profits based on a very optimistic growth projection. Yes, the higher the expectations, the higher the target price.

Here's what written on the Edge based on that Aseambankers research report.

• Aseambankers Research has raised the target price for Sunrise Bhd from RM3.92 to RM4.50 based on 11.5 times the calendar year 2008 earnings per share, supported by its revised net asset value (RNAV) of RM4.58.
  
  Maintaining a buy on Sunrise at RM3.78 and the earnings forecasts, it said the target price was well supported by the RNAV (previously RM4.50), which incorporates surplus from the recent proposed JV development on a 3.19 acre land in Mont Kiara.
  
  "Management guided that Sunrise has no plans to develop this new JV land in the immediate future, but merely intends to secure more land due to scarcity of supply around the Mont Kiara area," Aseambankers Research said.
  
  It said Sunrise's latest nine-month net profit at RM72.7 million, which was a 15.1% rise year-on-year, was within expectations, even though it only met 61.6% of consensus' and 65.9% of its full-year estimates.
  
  Aseambankers expected Sunrise's 4QFY07 results to be stronger, backed by a strong unbilled sales of RM1.3 billion as of April 23, 2007, and the near completion of Kiara Designer Suites and Solaris Mont Kiara (MK), which should lift margins. (read here for the rest of the Edge posting. )

And I was lucky enough to get a hold of Aseambankers research report.

Sunrise latest nine-month earning is around 72.7 million. So a full year earning of around 110 mil is about fair.

However, no one values stock based on current earnings. It's all about the future earnings.

And here is where it gets funky!

And in Sunrise case, the future earnings are based on an earnings expectations of 154.9 million. See the screenshot taken of Aseambankers research report.

And that works out to roughly a growth expectation of 40.8%

How?

Now my dearest Moo Moo Cow, I am not judging the issue of Sunrise as a stock but I am just totally amazed by the incredible projections made by our local research houses. Growth projections are simply worth 10 sen a dozen!

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Sunrise or is it sun down?

I remember this stock.

This was one stock which a couple of years back had tons and tone of conversion of ICULS. So despite its goods earnings, the earnings was always diluted for the minority shareholder.



The earnings was always diluted for the minority shareholder.

The above chart explains it so clearly. If you look at the one-year chart of Sunrise, this looked like a decent stock, right? See the lows of 1.20? It closed yesterday at 1.51. What's wrong?

Yeah, so what's wrong. Consider this. In fy 2004 Sunrise made 33.359 million. In fy 2005, it made a whopping net earnings of 104.692.

Given any other stock, such performance would have warranted Sunrise to be one gem of a stock.

But... Sunrise had this ICUL worth some 74.167 million and some 18.000 million ESOS. There is one nice table one can see clearly what I am talking about...

Sunrise had a 3 for bonus issue: see this link (click on the attached table)

Assuming no conversion of ICULs, Sunrise would have 302.298 million.

But after conversion of ICULS, which means after the entitlement of the 3 for 5 bonus issue too, Sunrise should have 449.765 milllion.

Difference? Dilution caused by 147.467 million shares. And based on 302.298 million, this meant 48.8% new shares were issued! Or 48.8% dilution in earnings. (sunrise today, shows it has 424.534 million shares)

Isn't it clear why despite the incredible earnings performance from Sunrise, where the earnings almost tripled, the minority shareholders didn't really benefit as much?

Is this what they call share market?

Does the minority shareholders feel that wealth is being shared?

This was one huge reason back then to avoid the stock. It simply wasn't worth it.

Now Sunrise reported its earnings yesterday. It wasn't too nice.

http://sahamas.net/view_topic.php?id=497&forum_id=28

What's even not too nice was the manner they lost the money and the manner the management is treating the issue.

Sunrise bullish on prospects for FY07
By Thomas Soon, 21 Aug 2006 10:10 PM

Sunrise Bhd is bullish on its prospects for the current financial year ending June 30, 2007 after making a prudent provisioning for one-off impairment losses totalling RM87.4 million in the previous year


I am going to write my comments in red.

Sunrise Bhd is bullish on its prospects for the current financial year ending June 30, 2007 after making a prudent provisioning for one-off impairment losses totalling RM87.4 million in the previous year. ( 87.4 million impairment losses. Wonder what is impairment losses?!! )

Due to the provisioning, the property developer posted a loss after tax of RM58.69 million for the three months to June 30, 2006 against a profit after tax of RM30.31 million a year earlier. Profit after tax for FY06 fell to RM4.53 million from RM104.35 million in FY05.

For FY06, Sunrise posted a revenue of RM359.2 million, which is about the same level as the previous year. Despite the provisioning, Sunrise declared a first and final gross dividend of 6 sen per share.

The impairment loss of the historical assets involved two parcels of leasehold land in Kajang (RM67.4 million), a piece of land in Mersing (RM8.4 million) and the land on which stands the American International School at Carlington in New South Wales, Australia (RM11.6 million).

The parcels of land in Kajang and Mersing were bought in 1996 and 1994, respectively. The impairment loss was done after a recent revaluation exercise by professional valuers, while the provision on the Australian operation was done after its decision not to continue the loss-making operations of the school. (Oh my god!! Bought in 1996 and 1994. Say, now is 2006. Impairment loss for assets bought some 8-10 years ago. So where is the professional valuers then? And how could the impairment losses be so huge? Huh? Huh? Huh? )

Sunrise executive chairman Tong Kooi Ong said the provision did not in any way affect the group's sales, operations and cash flows. He said its management decided on the provision in line with a more prudent practice. (excuse me, is this what you call prudent? How about an attempt to explain what happened 8-10 years ago? Where was the professional valuers then? And how could the impairment losses be so huge? An impairment loss of 67.4 million for 2 pieces of leasedhold land in Kajang bought 8-10 years ago is totally astonishing! What happened? Don't the shareholders have the right to know? )

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