Investment Highlights

• We maintain our BUY recommendation on Sunway Bhd (Sunway) with an unchanged fair value of RM1.93 per share based on SOP valuations (Exhibit 2). We make no changes to our FY20–22 numbers.

• Sunway acquired a 3.34-acre parcel of freehold land from CTM Development Sdn Bhd in the neighbourhood of Taman Mutiara, Cheras, Kuala Lumpur for RM42mil. The land comes with an approved development order, which will accelerate the development’s speed to market.

• Sunway is planning to build 255 units of townhouses and condominiums on the land with an estimated GDV of RM225mil. The development is targeted towards the medium segment with an indicative price starting from RM650 psf. The project is scheduled for launching by 1H2022 and targeted for completion by 2026.

• The acquisition price of RM42mil (RM288 psf) implies a cost to GDV ratio of 18.6%, and is within the range of 10%–20% for mixed residential developments in Klang Valley. While there are not many identical transactions within the area recently; the asking price for residential land surrounding the neighbourhood with land area larger than 10,000 sq ft ranges from RM250 psf to RM600 psf.

• The land is located 400 metres away from EkoCheras Mall (Exhibit 1) that offers direct connectivity to the Taman Mutiara MRT station. It is surrounded by amenities within a 5km radius including Sunway Velocity, Taman Tasik Permaisuri Park, Pantai Hospital Cheras, UKM Medical Centre and UCSI University with easy access to multiple highways such as the Cheras Kajang Expressway, the Kuala Lumpur Middle Ring Road 2 and the Salak Expressway.

• We are positive on the acquisition as it will help sustain Sunway’s property earnings over the medium term. Moreover, we believe the project will be a strong seller given its strategic location. Nonetheless, we made no changes to our FY20–22 earnings forecasts as the project is still in the planning stage.

• We believe the outlook for Sunway remains positive premised on: (i) its unbilled sales of RM3.1bil; (ii) a robust outstanding order book of RM5.3bil; and (iii) strong growth potential in its healthcare business. Maintain BUY.

Source: AmInvest Research - 2 Feb 2021