INVESTMENT HIGHLIGHTS

• Awarded Executive Condominium land in Singapore

• Neutral on the land award

• Marginally higher net gearing

• Earnings forecast maintained

• Maintain Neutral with a revised TP of RM1.61

Awarded Executive Condominium land in Singapore. Sunway Berhad (SUNWAY) announced that the Housing and Development Board of Singapore has awarded a land parcel measuring approximately 4.46 acres at Canberra Link, Sembawang, Singapore for a 99-year lease term Executive Condominium Housing Development at S$271m (RM817.2m) to Hoi Hup Realty Pte Ltd and Sunway Developments Pte Ltd. The Land will be acquired by a proposed new joint venture (JV) in which Hoi Hup Realty will hold 65% equity interest while Sunway will have equity interest of 35%.

Neutral on the land award. We are neutral on the land award as the earnings impact from the land award would be minimal in the near term. Project on the land is expected to launch in 2020 while development profits from the project will only be recognized upon its completion. Note that proposed development on the land is 500 units of Executive Condominium Housing Development with indicative GDV of more than SGD500m. Development period for the land is within 60 months from the award of land.

Marginally higher net gearing. The land award is expected to marginally impact balance sheet of SUNWAY. Net gearing of SUNWAY is expected to climb to 0.51x from 0.48x as of June 2018. Meanwhile, we maintain our earnings forecast for FY18/19 as the project will only be launched in 2020.

Maintain Neutral with a revised TP of RM1.61. We revise our TP for SUWNAY to RM1.61 from RM1.60 after factoring in the RNAV contribution from the land award. Our TP is based on Sum-of-Parts valuation. We maintain our Neutral call on SUNWAY due to neutral earnings outlook for property development division.

Source: MIDF Research - 13 Sept 2018