• Maintain BUY and MYR2.65 TP, 38% upside and c.3% yield. We are upbeat with Sunway’s successful tender of a new piece of land at Tengah Plantation Close in Singapore. As the location is close to the proposed Kuala Lumpur-Singapore High Speed Rail (HSR) station at Jurong East, the group is now not only anchoring its presence at Iskandar Puteri but also making a small but strategic presence on the Singapore side. We continue to like Sunway as it is also one of the key Johor thematic play.

• New land in Singapore. Sunway and Hoi Hup Realty Pte Ltd (35:65) have been awarded a land parcel (measuring 16,441 sqm) at Tengah Plantation Close at the tender price of SGD348.5m (or MYR1.2bn). The land is for a 99-year lease executive condominium development, and the completion of the project would be 60 months (or earlier), commencing 11 Sep 2023.

• The land is close to the proposed HSR Jurong East station. We are very upbeat with the successful tender, as the land at Tengah Plantation Close is near to the proposed HSR station at Jurong East. According to our Singapore property analyst Vijay Natarajan, the demand – especially for executive condominiums – is typically strong in that area, and the ASP is likely to be about SGD1,450 psf. Therefore, given the maximum GFA of 46,036 sqm, the estimated GDV would be around SGD719m (or MYR2.47bn). The site is also close to the future Tengah Plantation and Tengah Park MRT stations, as well as other amenities within 1km include Jurong Primary School, Bukit Batok Secondary School, Le Quest Shopping Mall etc.

• Right time to replenish landbank in Singapore. Also, we are not surprised by Sunway’s addition of new land in Singapore, given the group has depleted all of its land parcels in Singapore, with the latest two launches of Terra Hills in Pasir Panjang and The Continuum at Thiam Siew Avenue in February and April this year. Despite the regulatory tightening, take-up rates for both projects reached 36% and 27% as at 2Q23. Historically, Sunway has done well in almost all of its Singapore projects, which have been a big contributor to total annual sales.

• Earnings impact in later years. We make no changes to our FY23F-25F earnings as the executive condominium project is expected to be launched in early 2025, and earnings from this project will be recognised only upon completion.

• Maintain TP. The new land has minimal impact to our RNAV estimate and consequently, our TP. Our SOP valuation includes an 8% ESG premium given the 3.4 ESG score for the company.

Source: RHB Securities Research - 13 Sept 2023