ECM Libra Research has retained its earnings and fair value estimates for SUNWAY HOLDINGS BHD after the builder formed a strategic collaboration with interior fit-out (IFO) specialist LCL Corp Bhd to secure IFO jobs in the Middle East.

In a note yesterday, ECM Libra said it had also reiterated its buy call for Sunway shares at a fair value of RM1.85, taking into account the potential recovery in the company’s CONSTRUCTION and property earnings in the financial year ending December 2010.

“We are not adjusting our earnings at this juncture due to lack of clarity. But we are feeling rather positive about this development (collaboration with LCL).

“Going forward, our current annual order book assumption of RM1.5 billion may look rather conservative,” it said.

To recap, Sunway has secured RM2.7 billion new jobs in FY09 so far of which its effective share is RM1.9 billion. Its current remaining order book is RM3.38 billion.

At current prices, valuations for Sunway shares are deemed attractive at a price-to-earnings ratio (PER) of 7.4 times FY10 earnings.

The stock rose one sen to close at RM1.38 yesterday for a year-to-date gain of 94.37%, surpassing the FBM KLCI’s 43.72% rise.

On Wednesday, Sunway’s wholly owned unit Sunway Construction Sdn Bhd and LCL entered into a shareholders’ agreement where both parties would set up a joint-venture (JV) firm Best Expertise Sdn Bhd on a 60% and 40% equity basis to secure IFO jobs in Abu Dhabi.

The JV entity’s name will be changed to Sunway-LCL Interiors Sdn Bhd, subject to the regulators’ approval.

The collaboration will see Sunway and LCL leveraging on each other’s strengths within the construction fraternity in the Middle East.

Sunway Holdings has secured two major construction jobs in Abu Dhabi with an outstanding order book of RM1.8  billion.

The company’s foray into the IFO market will complement its existing construction division, and will further enhance its credentials to clinch new projects in the Middle East.

At the same time, Sunway is also expected to gain from LCL’s vast experience within the IFO segment in Dubai.

“We understand that LCL has been eyeing several IFO projects in Abu Dhabi following the severe downturn in the construction sector in Dubai. We see much synergy in the joint venture by these two entities,” ECM Libra said.