We maintain our Buy call and MYR3.55 FV. Sunway and Mitsui Fudosan have  entered  into  a  JV  to  undertake  the  development  of  Sunway  Geo Residences.  We  view  this  positively  as  the  foreign  platform  that  this Japanese  partner  can  bring  in  is  the  key  value  add  to  the  company. Sunway’s  pool  of  potential  buyers  will  be  expanded,  and  the  crossselling could also benefit other projects, particularly Sunway Iskandar.

• Tie-up  with  Mitsui  Fudosan.  Sunway’s  60%-owned  subsidiary  and Mitsui  Fudosan  have  entered  into  a  67:33  JV  to  undertake  the development  of  Sunway  Geo  Residences  (GDV  MYR319m).  The  6.8-acre leasehold land,  transacted at MYR59.2m, translates  into a price of MYR200  psf.  Sunway  Geo  Residences  comprises  two  blocks  of  472 condo  units with  built-ups of  829  to  1,200 sqf,  and  an  ASP  of MYR850 psf.  Largely due to the strategic location, the recent preview of the first block to staff and loyal customers  attracted  a booking rate of 70%.  The retail shops and flexi suites launched in mid-2013 are 80-90% sold.
   
• A foreign platform is the key. We believe that the foreign platform that Mitsui Fudosan  can bring in is the key value add to the company.  Note that Mitsui Fudosan is also a JV partner  of  E&O (EAST MK, TRADING BUY, FV:  MYR2.70) in  The Mews project in KL, which achieved a takeup  rate  of  >70%,  with  foreigners  comprising  the  bulk  of  buyers. According to Sunway, Mitsui Fudosan has a database of 300k Japanese customers. As such, the second block of Geo Residences  is  likely  to  be marketed in Japan and at higher selling prices.
   
• Sunway  Iskandar  to  benefit  too?  The  potential  of  cross-selling  other products will be  an  added advantage  for  the JV.  We do not rule out the possibility  of  Sunway  roping in  Mitsui Fudosan  for  its Sunway Iskandar project,  considering  that  it  is  a  sizeable  development  covering  1,770 acres  of land  and  a  GDV of MYR30bn.  The Iskandar region has gained traction  among  foreigners.  Phase  1  of  Sunway  Iskandar  comprising serviced apartments and offices is due for launch at year-end.
   
• Valuations. The JV will have minimal impact on our RNAV. We maintain our Buy call  on Sunway, with our FV kept at  MYR3.55, based on  a 25% discount to the stock’s RNAV. 

Source: RHB