Sunway acquires 17 acres of prime leasehold land in Kelana Jaya that brings a GDV of MYR1.8bn. Maintain BUY with a revised TP of MYR4.10 (21% upside), after we impute the incremental value and adjust for the entitlement of dividend-in-specie. The recent share price correction suggests that investors could have overlooked the lumpy special cash dividend post the listing of Sunway Construction.

• Buys prime land in Petaling Jaya (PJ). Sunway announced its acquisition of 17 acres of land in Kelana Jaya, PJ, at a purchase consideration of MYR286m. The acquisition will be funded via bank borrowings and/or internal funds.
• Reasonable valuations. The purchase consideration translates into land cost of MYR386 psf, which is deemed reasona ble after taking into account the commercial status of the land (mainly leasehold) and 4x plot ratio. The site is easily accessible via Damansara-Puchong Highway (LDP) and Federal Highway, and adjacent to a 15-acre water retention pond and the scenic Kelab Golf Negara Subang – which has two 18-holegolf courses. It is within close proximity to Sunway Resort City and Mah Sing’s (MSGB MK, NEUTRAL, TP: MYR2.18) Icon City as well as WCT’s (WCTHG MK, BUY, TP: MYR1.75) Paradigm Mall. Sunway will develop the land into a mixed development, comprising seven residential blocks with a commercial podium. Based on an indicative ASP of MYR800 psf, the project will bring a GDV of MYR1.8bn over a development period of five years.
• Forecasts. We keep our earnings forecasts unchanged as the impact on FY17 earnings should be rather minimal assuming the project is launched in late FY16.
• Maintain BUY with a revised TP of MYR4.10. We maintain a BUY rating on Sunway. We still believe there is further upside to share price even after the ex-date (on 6 May) for dividend-in-specie, as the component of special cash dividend post the listing of Sunway Construction could be quite attractive at about 25-28 sen per share. After we impute the incremental value from this land parcel in Kelana Jaya and adjust for the entitlement of dividend-in-specie, our TP is revised to MYR4.10 (from MYR4.18), based on SOP valuation.