According to Frost & Sullivan, the market size of the commercialfitting-out industry in Hong Kong and in Macau will increase with aCAGR of 8.2% and 13.1%, respectively, in 2015-2019. In addition, Ipsosestimated that the ASP of fitting-out projects would maintain the growthtrend in Hong Kong and Macau.
Sundart (“the Company”) is the leading integrated fitting-outcontractor in Hong Kong and Macau, specializing in providingprofessional fitting-out contracting services for residential and hotelprojects, public buildings, and commercial projects. The Company’sbusiness includes: 1) fitting-out business, 2) alteration and addition, andconstruction, and 3) manufacturing, sourcing and distribution of interiordecorative materials.
We expect the revenue to increase from HKD4,133 million in FY15 toHKD4,905 million in FY18, with a CAGR of 5.9%. Gross margin shouldincrease from 14.1% in FY15 to 18.2% in FY18. Net profit shouldincrease from HKD382 million in FY15 to HKD631 million in FY18 witha CAGR of 18.3%.
Initiate the EPS estimates of FY16-FY18 at HKD0.255, HKD0.264 andHKD0.293, respectively, or FY15-FY18 EPS CAGR of 4.9%. We set theTP at HKD5.00, representing 19.6x/18.9x/17.1x FY16/FY17/FY18 PER.Initiate with “Accumulate”. Main risks are continuous increase in labourcosts and lower-than-expected new contracts received.