Sunway-Hoi Hup JV announced a land acquisition of residential freehold land at Thiam Siew Avenue, Tanjong Katong, Singapore for a total consideration of SGD815.0m (approximately RM2.51bn) and will be redeveloped into a new luxury private residential development (indicative GDV SGD2.0bn). We are positive as the group’s effective GDV is expected to increase by c.5% to RM40.1bn with the proposed development. Based on sale price SGD815m, and a further estimated development charge of SGD284m, the implied land cost is SGD1,488 psf per plot ratio, on par with the recent acquisition of Flynn Park, Pasir Panjang (SGD 1,355 psf per plot ratio) as well as IOIPG’s Marina View land acquisition (SGD1,378 psf per plot ratio). Furthermore, given the land’s strategic location, we reckon that it will be well-received like Sunway’s other ongoing projects. We maintain our forecast and BUY call with an unchanged TP of RM2.58 based on SOP-derived valuation.

NEWSBREAK

Sunway, through its joint venture vehicle with Singapore developer, Hoi Hup Realty Pte Ltd (30:70) has announced a land acquisition from the owners of 22 plots of residential freehold land at Thiam Siew Avenue, Tanjong Katong, Singapore for a total consideration of SGD815.0m (approximately RM2.51bn). The land currently comprises landed residential units with a total land area of approximately 263.8k sqft (approximately 6.06 acres) and will be redeveloped into a new luxury private residential development (indicative GDV SGD2.0bn) with an allowed plot ratio of 2.8 times, subject to authorities’ approval.

The land is located in prime District 15 area on the fringes of Singapore Central Business District. It has excellent accessibility and connectivity to Dakota MRT station (600m away) and Paya Lebar MRT Interchange (800m away). The land also within close proximity to amenities and prominent education institutions.

HLIB’S VIEW

Positive. We are positive as the group’s effective GDV is expected to increase by c.5% to RM40.1bn with the proposed development. Based on sale price SGD815m, and a further estimated development charge of SGD284m, the implied land cost is SGD1,488 psf per plot ratio, on par with the recent acquisition of Flynn Park, Pasir Panjang (SGD 1,355 psf per plot ratio) as well as IOIPG’s Marina View land acquisition (SGD1,378 psf per plot ratio). Furthermore, given the land’s strategic location, we reckon that it will be well-received like Sunway’s other ongoing projects (Parc Central recorded a take up rate of 95% while Ki Residence’s latest take up rate was 75%). The development is expected to be launch In 1Q23.

Gearing impact. Gearing will remain largely unchanged at 0.57x (as of 2Q21) since it's a JV company and Sunway only has a 30% stake in the JV.

Forecast. Maintain our forecast pending more details of the developments.

We maintain our BUY call with an unchanged TP of RM2.58 based on SOP-derived valuation. Sunway remains our top pick given its well-integrated property, construction and building material operations. With its wide ranging business exposure, the group is a good proxy to the eventual economic recovery. Meanwhile, its efforts to expedite expansion of healthcare with its new strategic partner GIC, will culminate in the separate listing of healthcare unit to help unlock value in the group.

Source: Hong Leong Investment Bank Research - 22 Nov 2021