Buys Land in Wangsa Maju

Sunway’s 55% owned subsidiary, Sunway Avila S/B signed a sale and purchase agreement to acquire a parcel of freehold land measuring 3.69acres in Wangsa Maju for RM36.97mn which is payable over two years.

Strategic Location

Located in Wangsa Maju, the land is about 8km from Kuala Lumpur City Centre (KLCC). In addition, the land is located about 550 meters from the Sri Rampai LRT station which is a six stops or 12 minutes to KLCC on the LRT. Other amenities within 3km of the land include, Wangsa Walk Mall, Setapak Central Mall, and Tar College University. In terms of accessibility, the land also has easy access to and from the DUKE and MRR2 highways.

RM300mn GDV Residential Development

Management guided that the land is slated for a residential development comprising 468 condominium units with an estimated GDV of RM300mn. The proposed development is anticipated to replicate the success of Sunway Avila which is sited just 200m away from the new land. Note that, the first tower of Sunway Avila, which was launched in the first half of 2019 has been 90% taken up within a short period of time. Scheduled for launch in 2H2021, the project is expected to be completed within a 6-year development period.

Our View

This marks the group’s 5th land acquisition for this year. With this acquisition, Sunway has replenished RM4.8bn GDV this year, boosting the group’s total landbank to 3,359 acre with a total potential GDV of RM58.9bn (effective RM39.5bn)

In terms of land cost, the land price is circa RM230psf or 12.3% of the estimated GDV. The land cost to GDV ratio comfortably falls within the typical range of 10-20%, which we believe is fair. We also note that the land price is cheaper than Sunway’s acquisition price of RM270psf for 4.34 acres Sunway Avila announced in 2017. In addition, the land is acquired with an approved development order, thus enabling the group to launch the project as soon as second half of 2021.

Overall, we are positive on the land acquisition as it is in line with the group’s objective to ramp up its landbanking activities focusing on strategic lands suitable for standalone or transit-oriented development. Future landbanking is supported by the group’s healthy net gearing of 0.36x and a cash balance of RM6.4bn.

Impact

We leave our FY19-21 estimates unchanged for now, pending the completion of the acquisition.

Valuation

No change to our target price of RM1.78/share, based on target average blended CY20 PE/PB of 14x/0.9x. With a potential total return of 10%, we maintain our Hold recommendation on Sunway.

Source: TA Research - 29 Oct 2019