@tannyye Thanks for your comment. However, the formula used for calculating the price dilution seems overlook the value of PA (RM1.00) to be credited as share capital. It should be (RM1.71 X 5) + RM1.00/6 = RM1.59. At the same time, the investment value suppose to be RM1.22 and not RM1.415, therefore the returns should be : (RM1.59 - RM1.22)/RM1.22 = 30.3% excluding dividend received during the next five years. Of course, the payment of dividend to PA holders subjected to the profitability of the Group but Sunway need to pay dividend to PA holders first if they intend to declare any dividend to shareholders of ordinary shares during the next five years. Besides, there is a high possibility of appreciation for the price of mother share at the end of fifth year.

@invest icon Thanks for your advice. What I mean 6.54% dividend payment is actually for ordinary shares where Sunway has to declare RM0.0654 per ordinary share each year for the next five years in order to match with dividend received by unit holder of PA with the same investing amount of mother shares as at 12 March 21.

1,000 mother shares X RM0.0654 X 5 = RM327.00
vs
(1,384 units of PA X RM0.0525 X 4 years) + (692 units of PA X RM0.0525)# = RM326.97

#Unit holder of PA entitled payment of dividend for 50% of their holding in the fifth year after converting 50% of their PA into ordinary shares.

Even Sunway declare higher than RM0.0654 per ordinary share each year for the next five years, there is still 38.4% or RM649 (if mother share maintain at RM1.69 at the end of fifth year) difference between investing in mother shares and PA with the same investing amount. Likewise, if the mother shares drop to RM1.00 at the end of fifth year, there is still difference of RM384.

Optimistically, if the price of mother share increase to say RM2.00 at the end of fifth year, the difference in term of money value even wider i.e. RM768 (RM2.00 X 1,000 mother shares = RM2,000) vs (RM2.00 X1,384 mother shares after converting from PA = RM2,768).

Fully agree with trader808 that the price of Sunway PA seem really undervalued. The prices gap between mother share and PA as at 12 March 21 (RM1.69 vs RM1.22) is so wide (about 38.5%).

Assuming you dispose 1,000 shares of the mother share now, you are able to purchase back 1,384 shares of PA with the same value. You will receive the dividend payments for the next five years amounting to RM326.97 [(1,384 X RM0.0525 X 4) + (692 X RM0.0525)]. Of course, the mother shares are also entitled for dividend payment, but Sunway has to declare 6.54% dividend per share each year for the next five years to match the dividend payments of PA.

Ignoring the impact of the dividend payments between mother share and PA, assuming the price of mother share maintain at RM1.69 or drop to RM1.00 at the end of fifth year, the two scenarios as below :

Scenario 1 :

Price of mother share at the end of fifth year : RM1.69
Investment value if maintaining with holding 1,000 mother shares : RM1,690
Investment value if disposing 1,000 mother shares & purchase 1,384 PA : RM2,339
Diff (%) : 38.4%


Scenario 2 :

Price of mother share at the end of fifth year : RM1.00
Investment value if maintaining with holding 1,000 mother shares : RM1,000
Investment value if disposing 1,000 mother shares & purchase 1,384 PA : RM1,384
Diff (%) : 38.4%

If you are long term investor and confident with the management of Sunway where they will enhance the value of the mother shares at the end of fifth year, it's better to dispose the mother shares now and purchase PA with the potential higher returns of 38.4%.

As a shareholder of Sunway today, I intend to apply the above strategy. Can anyone here give me some advice whether this is a smart move ?

The price of Sunway PA seem really undervalued. The prices gap between mother share and PA as at 12 March 21 (RM1.69 vs RM1.22) is so wide (about 38.5%).

Assuming you dispose 1,000 shares of the mother share now, you are able to purchase back 1,384 shares of PA with the same value. You will receive the dividend payments for the next five years amounting to RM326.97 [(1,384 X RM0.0525 X 4) + (692 X RM0.0525)]. Of course, the mother shares are also entitled for dividend payment, but Sunway has to declare 6.54% dividend per share each year for the next five years to match the dividend payments of PA.

Ignoring the impact of the dividend payments between mother share and PA, assuming the price of mother share maintain at RM1.69 or drop to RM1.00 at the end of fifth year, the two scenarios as below :

Scenario 1 :

Price of mother share at the end of fifth year : RM1.69
Investment value if maintaining with holding 1,000 mother shares : RM1,690
Investment value if disposing 1,000 mother shares & purchase 1,384 PA : RM2,339
Diff (%) : 38.4%


Scenario 2 :

Price of mother share at the end of fifth year : RM1.00
Investment value if maintaining with holding 1,000 mother shares : RM1,000
Investment value if disposing 1,000 mother shares & purchase 1,384 PA : RM1,384
Diff (%) : 38.4%

If you are long term investor and confident with the management of Sunway where they will enhance the value of the mother shares at the end of fifth year, it's better to dispose the mother shares now and purchase PA with the potential higher returns of 38.4%.

As a shareholder of Sunway today, I intend to apply the above strategy. Can anyone here give me some advice whether this is a smart move ?