After posting a sharp decline due to economic slowdown back in FY20 following the COVID-19 pandemic, Sunsuria Bhd's (Sunsuria) revenue has since been steadily recovering, ending FY24 with a revenue of RM627.8m, topping FY19's RM534.3m. However, Group net profit is still lagging pre-pandemic levels at about RM24.9m in FY24, as compared to RM135.5m in FY19. That said, we now believe that the Group's profits could also see improvements driven by higher property development projects that commanding higher margins and as its new businesses such as education and healthcare maturing. To recap, the Group's last few quarters' revenue growth was driven mainly by projects such as Tower A, C, D and E in Bangsar Hill Park, Seni Residences in Sunsuria City and Sunsuria Kejora Business Park's Semi-D Industrial (Phase 1) in Puncak Alam. In FY24, the opening of Concord College International School in September 2024 also contributed to the its revenue, complementing the revenue contribution from property division. Going into FY25, the Group may unveil its redevelopment project in Kampung Baru, which touted to have total gross development value of RM2.64bn (Phase 1). All told, we maintain our Trading Buy with TP unchanged at RM0.55, pegged at 0.5x to book value.

• Phase 1 of Kampung Baru Redevelopment in FY25? The Group just completed the land deal recently. To recap, it was announced earlier that Sunsuria has bought a 20%-stake in a joint-venture for the 9.66-acre land that is estimated to yield about RM2.68bn in GDV (Phase 1). The land is located at Kampung Sungai Baru, which is in proximity to the Kuala Lumpur city center. We understand that Phase 1, 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. Furthermore, it has entered into a joint venture agreement with 8 existing landowners for Phase 2 of the proposed redevelopment. However, it has yet to commence the land acquisition process for Phase 2, which covers an area of approximately 1.71 acres. The land costs appear to be attractive, and hence we believe that the JV could be one of the key income drivers in the next few years. Albeit owning only 20% stake, we do not discount the possibility of the Group adding its stake in the JV, similar to its previous JV deals. Case in point is it also increased its stake in Bangsar Hill Park from 51% to 84% early this year.
• 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.

Source: PublicInvest Research - 24 Dec 2024