SUNWAY: Strategic Takeover Bid Announced, Analyst Retains Hold Rating

Deal Overview

Sunway Bhd has launched a conditional voluntary takeover offer for all ordinary shares in IJM Corporation Berhad (IJM), a move poised to significantly expand its footprint across property development, construction, and infrastructure sectors. The offer, valued at approximately RM11.0bn upon full acceptance, is set to solidify Sunway’s position as one of Malaysia’s largest integrated domestic platforms.

The proposed acquisition entails an offer price of RM3.15 per IJM share. The consideration structure includes RM0.315 (10%) in cash and RM2.835 (90%) in newly issued Sunway shares, based on an issue price of RM5.65 per Sunway share. This implies that each IJM share tendered would receive approximately 0.501 Sunway shares plus RM0.315 in cash. The transaction is contingent upon several key approvals, including Sunway obtaining over 50% voting control of IJM, securing Bursa Securities’ approval for the listing of the consideration shares, and gaining approval from Sunway shareholders at an extraordinary general meeting.

Strategic Rationale and Financial Impact

Analysts at TA Securities note that the RM3.15 per share offer represents a premium of approximately 15-28% to IJM’s recent traded prices and VWAPs prior to the announcement. They view the pricing as reasonable and not aggressive from Sunway’s perspective, consistent with historical Malaysian takeover premiums and not constituting a deep control premium.

Strategically, the acquisition is expected to materially enhance Sunway’s scale across its core businesses, strengthening its market positioning. On a pro-forma basis, assuming full acceptance, the enlarged group is projected to generate approximately RM17.1bn in revenue, RM2.4bn in EBITDA, and RM1.8bn in net income, with a total asset base nearing RM58bn. The combined entity would command a substantial landbank of around 5,685 acres with an estimated gross development value (GDV) of approximately RM118bn, alongside a construction order book of around RM13.0bn. This is expected to significantly bolster medium-term earnings visibility and bid competitiveness. Management has also highlighted potential synergies from centralised procurement, process harmonisation, and resource sharing.

Financially, pro-forma net gearing is expected to improve from 0.56x pre-transaction to around 0.50x post-transaction, thanks to the enlarged equity base from new share issuance. While management’s pro-forma analysis, excluding synergies, suggests a modest near-term EPS accretion of c.2%, TA Securities’ forward forecasts, based on full acceptance, anticipate a more significant c.15-17% uplift in medium-term EPS for the consolidated entity.

Analyst’s View and Outlook

Despite the strategic benefits, TA Securities maintains a HOLD recommendation on Sunway, with an unchanged SOP-derived target price of RM6.04. The firm acknowledges that while the acquisition is strategically sound, near-term investor attention will likely focus on deal completion and execution. The predominantly equity-funded structure may introduce technical considerations, potentially leading to portfolio rebalancing and some selling pressure, particularly among IJM shareholders who may already hold Sunway or prefer not to increase exposure to a larger conglomerate. Without quantified synergies or clear Return on Equity (ROE) uplift targets, the full valuation recognition of the enlarged earnings base is expected to emerge gradually, with an integration discount potentially persisting in the interim. The firm makes no changes to its earnings forecasts pending deal completion and clarity on final shareholding outcomes.