News

• Sunway and its JV partners announced winning a tender to acquire a piece of 5.2 acres of 99-year leasehold land at Anchorvale Lane, Sengkang for S$240.95m (or RM724.14m).

• The JV entity consists of Hoi Hup, Sunway, Oriental Worldwide Investment and Azuki Investment which has equity stake of 62:30:5:3 respectively.

• The land will be used for executive condominium housing development, consisting of 640 units with estimated GDV of S$520m.

Financial Impact

• With plot ratio of 3x, the acquisition price is translated to S$355 psf of allowable GFA. Land cost constitutes 46% of estimated GDV, which is fai r as normally it accounts for 40- 50% of total GDV in Singapore.

• With 30% stake, the expected effective GDV is about RM468m, which will increase total effective remaining GDV for the group by 1.5% to RM31.8bn.

• Assuming PBT margin of 13% and launch by end of FY17, we estimate the NPV of the project at RM43m or about 2 sen per share (0.6% of our TP).

Pros/Cons

• We are positive on the land acquisition as this will help to replenish its land bank in Singapore. To note, this proposed Achorvale development is the only project in Singapore after the launching of Mount Sophia and Novena.

• The proposed land is at strategic location with good connectivity. It is about 400m from Tong Kang LRT station and near to Seletar Mall, Compass Point Mall and upcoming Sengkang Hospital (expected to complete in 2018).

• Sunway will target to launch RM1.1bn of new projects including Sunway Geo Residences, Sunway Velocity and Sunway Iskandar. 1HFY16 effective sales already achieved RM510m, on track to meet full year sales target of RM1.1bn.

• Property effective unbilled sales stood at RM1.5bn, representing 1.25x of FY15’s property revenue.

Risks

• Execution risk; Regulatory and political risk (both domestic and overseas); Rising raw material prices; and Unexpected downturn in the construction and property cycle.

Forecasts

• Unchanged.

Rating

• BUY

Valuation

• Maintain BUY with TP unchanged at RM3.72 based on SOP valuation.

Source: Hong Leong Investment Bank Research - 7 Sep 2016