Investment highlights

• We maintain our BUY call on Sunway Bhd (Sunway) with an unchanged fair value of RM1.99 per share based on SOP valuations (Exhibit 4). We made no changes to our FY19–21 earnings forecasts.

• Sunway, via its 55% subsidiary Sunway Avila Sdn Bhd, has proposed to acquire a parcel of freehold land measuring 3.69 acres in Wangsa Maju for RM37mil. The land is located near its current development Sunway Avila and 550m from the Sri Rampai MRT Station (Exhibit 1).

• Sunway is planning a high-rise residential development comprising 468 condominium units. The project, with a GDV of about RM300mil, is expected to commerce in 2HFY21 and to be developed over a span of 6 years.

• We believe the acquisition price of RM37mil (RM230 psf) is fair given its cost-to-GDV ratio of 12.3%, which is considered low as compared to the average of 15% for high-rise mixed residential developments in Klang Valley. For comparison, Mah Sing acquired a 4.515-acre of leasehold land in Wangsa Melawati for RM314 psf in August 2019. The current asking price for residential land surrounding its neighbourhood with a land area larger than 2 acres ranges from RM300 psf to RM400 psf.

• The proposed development is anticipated to mirror the success of Sunway Avila which is sited just 200m away from the new development. The first tower of Sunway Avila comprises 405 serviced residences, which was launched in 1H2019, has been 90% taken up within a short period of time.

• Located about 550m from the Sri Rampai LRT station, the new development is surrounded by greenery and encircled by amenities including the Wangsa Walk Mall which is 700m away and Setapak Central Mall which is 2.7km away. Hospitals such as Columbia Asia and Gleneagles KL, and education institutions like International School Kuala Lumpur, Sri Utama, Fairview International School and TAR College are all within a 5km radius (Exhibit 3). The development is also accessible through the Duta–Ulu Klang Expressway (DUKE), Middle Ring Road 2 (MRR2), and Ampang–Kuala Lumpur Elevated Highway (AKLEH) highways (Exhibit 2).

• We are positive on the latest development as it will help sustain Sunway’s property earnings over the medium term. However, we made no changes to our FY19–21 earnings forecasts as the project is still in the planning stage. Maintain BUY recommendation with an unchanged fair value of RM1.99.

Source: AmInvest Research - 29 Oct 2019