Wins Land Tender in Singapore

Sunway, in a joint venture (JV) with Hoi Hup Realty (35:65), has won a 20,038.2 sqm (approximately 5 acres) of land parcel at Plantation Close, Tengah, Singapore (99-year lease term) for SGD423.4mn from the Housing and Development Board of Singapore. The tender price translates to SGD701 psf per plot ratio (ppr), based on the maximum gross floor area (GFA) of 56,107 sqm.

This site is located adjacent to a previous parcel on Plantation Close, which was also awarded to Hoi Hup and Sunway JV in September 2023 for SGD 348.5mn, equivalent to SGD703 psf ppr – see Figure 2. For additional information, please refer to our report dated September 13, 2023.

The tender for the Plantation Close site, which closed on Feb 1, 2024, attracted four bidders. Hoi Hup and Sunway JV’s winning bid exceeded the second-highest bid by 1.6% and the third-highest bid by 6.2%, as outlined in Appendix 1.

More Information About the Land

Plantation Close in Tengah is a newly developed housing estate nestled in the western region of Singapore, strategically positioned within the vibrant Jurong Lake District – see Appendix 2. Moreover, the Plantation Close site is set to experience enhanced connectivity with the completion of two MRT stations, namely Bukit Batok West and Tengah Park, as part of the Jurong Region Line. These stations are scheduled to be completed in phases from 2027 to 2029. Surrounded by a wealth of amenities found in the well-established Bukit Batok and the emerging Tengah Town, the location is an ideal choice for first-time buyers seeking a convenient, long-term home within the heart of the thriving Tengah District – see Appendix 3 - 5.

Executive Condominium Targeted for Launch in Mid-2025

The land is earmarked for a residential development comprising approximately 560 Executive Condominium (EC) units. The project's development timeline spans 60 months, starting on February 14, 2024, with an official launch expected in mid-2025. The gross development value (GDV) for the project has not been determined yet.

Our View

In terms of the acquisition price, the SGD701 psf ppr submitted by Hoi Hup and Sunway JV closely aligns with their earlier bid for an adjacent EC site, awarded to them in September 2023. Furthermore, the relatively minimal price difference between the highest and second-highest bids indicates a high level of developer confidence in the sustained strength of EC demand.

Given that ECs primarily cater to owner-occupiers, and many buyers are either first-time homebuyers or upgrading from public housing, they typically remain insulated from cooling measures, such as increases in Additional Buyer’s Stamp Duty rates, which predominantly target investors. As such, we expect a more resilient and stable demand pool for ECs.

Overall, we view the successful tender win as a well-timed enhancement to Sunway's land portfolio in Singapore. With the JV securing the two Plantation Close EC Plots, we anticipate a strategic synchronisation of the launch timing and pricing for these ECs.

We gather that the first parcel at Plantation Close is anticipated to generate a potential GDV of SGD730mn, suggesting an indicative launch price of SGD1,473 psf. This pricing aligns with the recent launch of Lumina Grand, an EC project in Bukit Batok, which achieved a 53% sales rate for its 512 units at an average price of SGD1,464 psf during its first weekend launch on January 28, 2024. That said, assuming a land cost to GDV ratio of 45-55%, we estimate that the launch price for the second parcel could range between SGD1,300 and SGD1,600 psf (refer to Figure 3).

Impact

No change to our FY23-25 earnings forecasts as earnings from EC project will be recognised only upon completion.

Valuation

Our SOP-derived target price is adjusted higher to RM3.18 from RM2.80 previously, as we factored in the revised TP for Sunway REIT and rolled forward our base year valuation to CY25. Sunway remains our top Buy pick in the sector, serving as an investment proxy for domestic economic growth and the revitalisation of Iskandar Malaysia. Additionally, we also recognise substantial value within the thriving Sunway healthcare division. Maintain Buy.

Source: TA Research - 16 Feb 2024