During our visit to Sunway’s project in Iskandar, its management showed its earnestness in making the 1,800-acre township a success. We like its strategies in marketing Citrine, the township’s first component. Given the concept, pricing, location, and considering the positive response to E&O’s recent launch of Avira terraces nearby, we believe Citrine will be well-received. Maintain BUY and MYR3.60 FV.

• Maiden launch for Sunway Iskandar.Sunway hosted a site visit and analyst briefing at its sales gallery in Iskandar yesterday. The first component, Citrine (GDV: MYR300m), will be officially launched in July. It is opposite E&O’s (EAST MK, BUY, FV: MYR3.52) Avira project, for which the first batch of terraces launched last month is 70% booked.
• Citrine’s products, pricing and marketing strategy.We are impressed with the lake view and greenery at the site. Currently, Sunway has 3,000 registrants on the list, out of which 60% are from Malaysia, 30% from Singapore, and 10% from other countries. The first component, Citrine, comprises 328 units of serviced apartments, 167 designer offices and 51 boutique retail lots. The serviced apartments,with built-ups of 618-1,571 sqf each, are priced at MYR700 psf (almost fully furnished) while the office units are priced at MYR550-650 psf.Management emphasises the company’s track record in building townships (Bandar Sunway and Sunway City Ipoh) and product offerings to differentiate itself from the other developers in Iskandar. We also concur with management’s strategy to concurrently build an international school (with a student capacity of 600) next to Citrine, so that critical mass can be achieved, especially in the initial phases, to attract tenancy and population. We view the product pricing as reasonable, and tad lower than the neighbouring projects’. Hence, we are not surprised that management admitted that Citrine’s gross margin would be in the low teens, but will be mitigated by the corporate tax exemption in Medini zone. Meanwhile, Sunway’s construction arm will also undertake the construction of Citrine to ensure the quality of the maiden phase.
• New JV partner to add value to township.In a few months’ time, a JV partner is likely to participate in developing one of the precincts of Sunway Iskandar. We understand that this JV partner should add value to the township, and at the same time, commit equity.
• Maintain BUY.We continue to like Sunway. While market conditions in Iskandar remain challenging, the right strategies are being adopted to boost potential buyers’ confidence in Sunway Iskandar.

Source: RHB