- We maintain our HOLD call on Sunway with an unchanged fair value of RM3.50/share based on a 15% discount to our SOP value of RM4.13/share.

- We do not expect any significant impact from the possible realisation of the state government’s proposal to impose higher tax rates on foreign property buyers.

- Sunway’s is highly exposed to the Johor property market, given its landbank of 1,770 acres in Iskandar Malaysia, which will be developed over a 15-year period, with a potential GDV of RM30bil.

- The group also has 88 acres of undeveloped landbank in Bukit Lenang in Johor Bahru. Given the size of the planned development in Iskandar Malaysia, take-up rates would be highly dependent on the participation of foreign buyers.

- At the operating level, we expect the property development division and the construction division to account for 42% and 22% of profit, respectively, in FY13F vs. 50% and 11% previously in FY12.

- Johor Mentri Besar Datuk Seri Mohamed Khaled Nordin has said the state government would impose higher tax rates for about 130,000 foreigners who own properties in the state.

- He said the matter had yet to be finalised but would be imposed by year-end following a state-wide property reevaluation exercise to ensure that local councils get proper tax returns.

- Johor’s property market could be in for a state of uncertainty within the next six months, until the matter is finalised by year-end. Sunway is not expected to undertake its maiden launch in Iskandar Malaysia until early next year.

- We believe the state government would not implement any measures that would be detrimental to the progress of Iskandar Malaysia – which had just only reached its tipping point in 2012.

- We continue to believe in Sunway’s longer-term play in Iskandar Malaysia – which we deem to be the second coming of the iconic Bandar Sunway as the group aims to replicate the mature township’s model and success in the southern tip of the country.

Source: AmeSecurities