• BUY, new TP of MYR3.45 from MYR3.00, 26% upside with c.2% FY24F yield. We are upbeat on Sunway’s successful tender bid for another piece of land at Plantation Close, Tengah in Singapore. This should anchor its presence in an area that stretches from Iskandar Malaysia to Jurong East in Singapore. As mentioned previously, the land is near the proposed Kuala Lumpur-Singapore High Speed Rail (HSR) station at Jurong East. Sunway remains a sector Top Pick, given its strategic presence in the southern region of West Malaysia, and the imminent listing of its healthcare unit.

• New land is adjacent to the previous parcel acquired. Recall that in Sep 2023, Sunway and Hoi Hup Realty (HHR) in a 35:65 partnership, acquired 16,441 sqm (four acres) of land in Plantation Close, Tengah via a tender. This new land it just successfully tendered for is adjacent to the four acres mentioned above. The tender price of SGD423.38m (or SGD7,546 psm) is similar to the previous price paid (SGD7,570 psm). Note that the new land has a maximum GFA of 56,107sqm vs 46,036 sqm for the previous one.

• Strategic presence in Jurong East. With the previous parcel, Sunway and HHR will have a combined nine acres in Plantation Close, Tengah. This should enable the consortium to come up with a better design and concept for the development there. The land is strategically located, being surrounded by amenities like schools, a hospital, shopping mall, the Chinese Garden MRT station and future Tengah Plantation and Tengah Park MRT stations. We also highlight that Tengah Plantation is 6km away from the proposed Jurong East HSR terminal in Singapore.

• Another executive condo (EC) project. Based on a GFA of 56,107 sqm and our estimated ASP of SGD1,450 psf, this EC project (to be situated on the new land) may fetch a GDV of SGD840m. This, together with the GDV of SGD730m for the previous parcel, would imply a combined GDV of SGD1.57bn for both projects. As such, this area will likely be the key property sales and earnings driver of Sunway’s Singapore operations in the years ahead. We maintain our FY23-25 net profit forecasts, as earnings from EC projects will be recognised only upon completion.

• Solid demand for ECs. According to our Singapore property analyst Vijay Natarajan, the Sunway-HHR partnership has a first-mover advantage there. The Tengah site is relatively new and growth prospects are strong, since the Jurong Region MRT line (to be completed in 2029) will boost connectivity. Demand for ECs remain encouraging in Singapore, as sector tightening measures announced last year hit the luxury property segment the most.

• Higher TP. Given the improving property market sentiment, we narrow our discount to RNAV to 30% (from 45%) for the property development segment. Our TP includes an 8% ESG premium applied.

Source: RHB Research - 16 Feb 2024