Investment Highlights

• We maintain our BUY call on Sunway Bhd (Sunway) with a revised fair value of RM1.73 per share from RM1.72 based on SOP valuation (Exhibit 3). We made no changes to our FY18-20 earnings forecasts.

• Sunway’s received a letter of award for the tender of a land parcel for a 99-year lease term at Tampines, Singapore from the Housing & Development Board through its 35:65 JV with Hoi Hup Realty Pte Ltd.

• The land has a plot ratio of 2.8 and GFA of 751,632 sq ft, will be used to develop an executive condominium housing project with 700 residential units, carrying a GDV of more than S$800mil. Tampines is an important noncentral commercial hub and one of the largest and most densely populated residential areas in Singapore.

• The total purchase consideration for the 6.16-acre land is S$434.45mil, 0.65% higher than the second highest bidder. At S$578 psf per plot ratio, the winning bid is comparable to the bids for Sumang Walk (S$583 psf per plot ratio), Canberra Link (S$558 psf per plot ratio) and Anchorvale Cresent (S$576 psf per plot ratio) which are located within a 15km radius of Tampines.

• According to the management, the development period is 60 months commencing from 22 January 2019. Sunway is targeting to launch the project in 1H2020. To recap, Sunway launched Rivercove Residences, Singapore in 2018 and saw take-up rates of 99% in just a few months, suggesting strong demand for executive condominiums in the island state.

• We are positive on the latest development as the new land will help to sustain Sunway’s property earnings from Singapore over the medium term. Based on our rough estimate, the project will contribute about S$28mil (RM85mil) of net profit to Sunway upon completion beginning 2023. Nonetheless, we believe the project is still a long way to go and shall seek further details of the project from the management. Hence we leave our numbers unchanged at this juncture.

Source: AmInvest Research - 24 Jan 2019