We  maintain  our  BUY  rating  with  a  higher  FV  of  MYR3.55  (from MYR3.52).  Sunway,  with  Hoi  Hup  Realty  and  SC  Wong  Holdings  in Singapore,  has  won  the  bid  for  a  5.87-acre  residential  site  at  Mount Sophia,  Singapore.  This  will  bring  an  additional  MYR2bn  GDV  to  its portfolio.  We  are  positive  on  this,  as  the  land  cost  is  reasonable  and Sunway’s past projects have seen encouraging take-ups.

- New land at Mount Sophia. The Urban Redevelopment Authority (URA) of Singapore had awarded a 5.87-acre land parcel at Mount Sophia, with 99-year lease term  and plot ratio of 1.5x, to the Hoi Hup Realty, Sunway and SC Wong (51:30:19 equity ratio) consortium at SGD442.28m. 

- Strategic  location.  Given  the  allowable  gross  floor  area  (GFA)  of 382,423 sq  ft, this translates into a land cost of SGD1,157 psf. We like the land given its strategic location, which is within  five  minutes  walking distance  of  the Dhoby Ghaut MRT Station,  the  Orchard Road shopping belt and the cultural area of Little India.

- An additional MYR2bn GDV.  The land  will be developed into 480 lowrise  2-  to  6-storey  condominium  units.  At  a  targeted  selling  price  of SGD2,300 psf, this gives a GDV of SGD800m (or MYR2bn). This means that the consideration makes up about 55% of the GDV, which is a norm in the Singapore market. Note that, the selling price is also 5-10% higher compared to the prices of other properties in the  neighbourhood in the secondary market.  Nevertheless, given  the  location, newer  design  and the  consortium’s  track  record  in  the  Singaporean  market,  we  foresee encouraging demand for this development.

- Forecasts.  We  make  no  changes  to  our  forecasts.  The  proj ect  is expected to be rolled out in 2H14, and will be completed within five years from  now.  Therefore,  earnings  contribution  will  only  kick  in  from  FY15 onwards.

- Valuations.  We  maintain  our  BUY  call  on  Sunway.  FV  is  revised  up slightly  to  MYR3.55  from  MYR3.52,  based  on  an  unchanged  25% discount to RNAV. Sunway is still our favourite. Apart from its  diversified property  projects  in  Malaysia,  joint-venture  property  developments  in Singapore  have,  thus  far,  generated  strong  sales  and  profits  for  the company.

Source: RHB