Sunsuria Berhad (Sunsuria) announced that it has entered into a conditional share sale and purchase agreement with Scenic Starhill Sdn Bhd (Scenic Starhill) to purchase 470,589 ordinary shares in KL City Gateway Sdn Bhd (KLCG), representing 20% of the total issued share capital of the latter for a total cash consideration of RM10.5m. Sunsuria will inject about RM40m in shareholder advances. These proposals are deemed as related party transactions as the remaining stake is held mostly by companies related to Tan Sri Datuk Ter Leong Yap, the Executive Chairman and major shareholder of the Company and Ter Shin Nie, the non-independent executive director of the Company. We understand that KLCG is the developer of approximately 9.66 acres of land located at Kampung Sungai Baru, where the redevelopment comprises two phases. Phase 1 (about 7.95 acres) is estimated to have gross development value (GDV) of RM2.68bn (with estimated cost of RM1.35bn). Hence, the implied land cost for the deal is at less than 10% of GDV based on Phase 1 alone, which is attractive in our view. Pending more clarity, we keep our earnings unchanged for now. All told, we maintain our Trading Buy call with TP unchanged at RM0.55, pegged at 0.5x to book value.

• Redevelopment of Phase 1 for the 9.66-acre land is estimated to yield about RM2.68bn in GDV. The land is located at Kampung Sungai Baru, which is in proximity to the Kuala Lumpur city center. We understand that Phase 1 of the Proposed Redevelopment, which covers an area of approximately 7.95 acres of land, will be developed into a high-rise, mixed-use integrated development, which will include both residential and commercial components. Further, KLCG has entered into a joint venture agreement with 8 existing landowners for Phase 2 of the Proposed Redevelopment. However, KLCG has yet to commence the land acquisition process for Phase 2, which covers an area of approximately 1.71 acres. Management is no stranger to urban regeneration projects such as this one as it has also successfully executed projects such as Bangsar Hill Park, with first phase mostly sold, and just unveiled phase two in 2024 and completed KL Gateway project in Kampung Kerinchi.
• Remaining total GDV of RM8bn. Sunsuria currently has 2,052 acres of undeveloped landbank with potential gross development value (GDV) of RM8bn which we estimate could take at least 8-10 years to develop. About RM6bn GDV is mainly from Sunsuria City @ Salak Tinggi which has already completed projects with combined GDV of RM1.4bn to-date. On-going residential development projects, among others, include Tower A, D and E of Bangsar Hill Park, Seni Residences and multi-facility serviced apartment Tangerine Suites at Sunsuria City township and integrated mixed development Forum 2 at Setia Alam. Bangsar Hill Park Development Sdn Bhd unveiled Talisa, the second phase of its Bangsar Hill Park development early this year. Talisa has a GDV of RM1.1bn and comprises 802 units across two blocks (Blocks B and C). Block B is a 57-storey tower with 410 units while Block C is a 55-storey tower with 392 units.

Source: PublicInvest Research - 18 Nov 2024