SUIWAH (9865) - SUIWAH CORPORATION - Northern Sunshine

Suiwah Corporation‟s (Suiwah) current market capitalisation has only factored in the value of its retail business (operated under the Sunshine brand), manufacturing division, Sunshine Square property and net cash. Investors have overlooked Suiwah‟s valuable landbank (for example, its 9-acre prime commercial land in Bandar Baru Air Itam, Penang Island) as well as its newly-opened shopping mall in Bertam, Seberang Prai, which is fully tenanted. The group has a healthy balance sheet (net cash/S-T investment of RM33.4m or RM0.58/share). Based on our SOP valuation, we see deep underlying value in the company as it could be worth at least RM274m or RM4.78 per share.

Background of the company. Suiwah has its origins as the first neighbourhood general merchant in Air Itam, Penang in 1961. It runs its retail business under the „Sunshine brand which is a household name in Penang. The group was listed on the Second Board of Bursa Malaysia in 1995 and transferred to the Main Board in 2005. The group has three key divisions: (i) retail; (ii) manufacturing; and (ii) property investment & development. Under its retail operation, Suiwah operates departmental stores and supermarkets such as Sunshine Square, Sunshine Lip Sin, Sunshine Farlim Shopping Mall and Sunshine Bertam Shopping Mall as well as convenience stores within MNCs factories (e.g. ASE Electronics and Agilent). Under its manufacturing segment, Suiwah has diversified into flexible printed circuit board manufacturing under its subsidiary, the Qdos group. In recent years, Suiwah has moved into property development/investment to realise the potential of its landbank as well as to complement its retailing business.

Overlooked development land and shopping mall. Suiwah owns a number of landbank and properties (see list of properties in figure 7), including 9 acres of prime commercial land in Bandar Baru Air Itam, Penang Island. We understand from various sources that the 9-acre plot will be developed into a mixed development project with two blocks of serviced apartments and SOHOs (estimated GDV of around RM300m) and one retail podium with net lettable area (NLA) of 900,000 sq ft. The development project is situated in the established Air Itam area (also known as Farlim) and construction is expected to commence this year. Besides the Air Itam land, Suiwah also owns various properties such as the newly-opened Sunshine Bertam Shopping Mall and a piece of 11.5-acre freehold land in Jawi, Seberang Prai.

Consistent dividend payout and healthy balance sheet. Suiwah has consistently been paying 8 sen per annum (yield of 3.8%) for the last seven years. Besides that, the company‟s balance sheet and operating cash flows are healthy and solid. Its net cash position currently stands at RM33.4m (including S-T investments) with positive net operating cash flow of around RM25m-RM40m for the last three years.