Sunway Berhad; Buy; RM3.10
Price Target: RM3.50; SWB MK

Sunway, in a JV with Hoi Hup Realty and S C Wong Holdings (30:51:19), has clinched a 5.87 acre land parcel at Mount Sophia (99-year lease term) for S$442.3m (S$1,157 psf of allowable GFA based on a plot ratio of 1.5x) from the Urban Redevelopment Authority of Singapore. This represents the 8th JV with Hoi Hup Realty and is Sunway’s 9th development in Singapore. With this development, the Group’s Singapore projects account for 8% of total GDV of RM55.6bn. The winning bid was 1% higher than the second highest bid.

Mount Sophia is located in a prime area approximately 5 minutes from Dhoby Ghaut MRT Station, Orchard Road and Little India. The proposed development is residential low rise (2-6 storey) condominiums of approximately 480 units and is to be developed within 60 months commencing from 12 September 2013.

Mount Sophia is expected to contribute positively to Sunway’s earnings from FY2015 onwards. Assuming a 15% net profit margin on GDV of S$800m (ASP S$2,300 psf), Sunway’s profit over the duration of the project is c. S$36m. We have not factored this into our earnings and SOP. We maintain our BUY rating on Sunway with an unchanged TP of RM3.50 (10% discount to SOP). Valuations are inexpensive trading at just FY14F PE and P/NTA of 13x and 1.9x respectively

Source: HwangDBS Research - 18 Sep 2013