Wins Land Tender in Singapore

Sunway, in a joint venture (JV) with Hoi Hup Realty (35:65), has won a 16,441.2 sqm of land parcel in Tengah E2, Plantation Close (99-year lease term) for SGD348.5mn from the Housing and Development Board of Singapore. This acquisition sets a new record high for Executive Condominiums (EC) land, with the tender price translating to SGD703 psf per plot ratio (ppr). This calculation is based on the maximum Gross Floor Area (GFA) of 46,036 sqm, determined at a plot ratio of 2.8.

The tender for the site in Plantation Close, which closed on June 27, drew strong interest, with nine tenderers submitting bids. Sunway and Hoi Hup Realty JV's winning bid exceeded the second-highest bid by 6% and the third-highest bid by 11%, as detailed in Appendix 1.

More About the Land

Tengah Plantation Close EC is a newly developed housing estate in the western region of Singapore, strategically positioned within the vibrant Jurong Lake District – see Appendix 2. Nestled between Jurong West and Choa Chu Kang, this prime location offers superb connectivity and transportation options.

Additionally, the site is strategically positioned in the emerging Tengah town area, enjoying proximity to future MRT stations like Bukit Batok West MRT Station and Tengah Park MRT Station, both part of the Jurong Region Line. Currently, the town is served by the Jurong East and Choa Chu Kang MRT stations, which offer direct access to downtown Singapore.

Moreover, Tengah Plantation Close EC is surrounded by a wealth of amenities found in the well-established Bukit Batok and the emerging Tengah Town, making it an ideal choice for first-time buyers seeking a convenient, long-term home within the heart of the thriving Tengah District – see Appendix 3 - 5.

Executive Condominium Targeted for Launch in 2025

The land is earmarked for a residential development comprising approximately 495 EC units. The project's development timeline spans 60 months, starting on 11 September 2023, with an official launch expected in early 2025. The Gross Development Value (GDV) for the project has not been determined yet.

Our View

We are positive about this development, representing a timely addition to Sunway's land portfolio in Singapore. This comes after the full launch of two projects this year, Terra Hill (Private Condominiums, 36% take-up rate) and The Continuum (Private Condominiums, 27% take-up rate).

As depicted in Figure 2, the Hoi Hup-Sunway bid for the land was approximately 6% higher than the SGD662 psf ppr paid for an EC site in Bukit Batok West Ave 8. Furthermore, the land rate is nearly 17% higher than the first EC site, Copen Grand, located along Tengah Garden Walk, awarded to City Developments Limited and MCL Land in June 2021 for SGD400.3mn (SGD603 psf ppr).

We believe the premium pricing reflects the confidence that Sunway and Hoi Hup have in the EC market. The EC market has shown robust demand, as evidenced by the full sell-out of Copen Grand within one month of its October 2022 launch, at an average price of approximately SGD1,340 psf. Another EC project, Tenet, in Tampines North, developed by Qingjian and Santarli Construction, achieved a 93% take-up rate after a balloting process, with an average price of around SGD1,360 psf when it launched last December. Given recent increases in additional buyer's stamp duty for second property purchases, ECs are likely to attract more interest due to their upfront remission benefits.

Assuming a land cost to GDV ratio of 50-60%, we estimate that the launch price for the Tengah Plantation Close EC could range between SGD1,200 and SGD1,400 psf (refer to Figure 3), aligning with recent EC launches. Additionally, real estate agents quoted by EdgeProp Singapore estimate that the launch price for the future EC at the Plantation Close site could be in the range of SGD1,450 to SGD1,550 psf.

Impact

No change to our FY23-25 earnings forecasts pending more details on the proposed development.

Valuation

We maintain our Buy recommendation with an unchanged target price of RM2.40, based on SOP valuation.

Source: TA Research - 13 Sept 2023