Target Price: MYR3.55
Replenishing Landbank In Singapore
We maintain our BUY rating with a higher FV of MYR3.55 (from MYR3.52). Sunway, with Hoi Hup Realty and SC Wong Holdings in Singapore, has won the bid for a 5.87-acre residential site at Mount Sophia, Singapore. This will bring an additional MYR2bn GDV to its portfolio. We are positive on this, as the land cost is reasonable and Sunway’s past projects have seen encouraging take-ups.
• New land at Mount Sophia. The Urban Redevelopment Authority (URA) of Singapore had awarded a 5.87-acre land parcel at Mount Sophia, with 99-year lease term and plot ratio of 1.5x, to the Hoi Hup Realty, Sunway and SC Wong (51:30:19 equity ratio) consortium at SGD442.28m.
• Strategic location. Given the allowable gross floor area (GFA) of 382,423 sq ft, this translates into a land cost of SGD1,157 psf. We like the land given its strategic location, which is within five minutes walking distance of the Dhoby Ghaut MRT Station, the Orchard Road shopping belt and the cultural area of Little India.
• An additional MYR2bn GDV. The land will be developed into 480 lowrise 2- to 6-storey condominium units. At a targeted selling price of SGD2,300 psf, this gives a GDV of SGD800m (or MYR2bn). This means that the consideration makes up about 55% of the GDV, which is a norm in the Singapore market. Note that, the selling price is also 5-10% higher compared to the prices of other properties in the neighbourhood in the secondary market. Nevertheless, given the location, newer design and the consortium’s track record in the Singaporean market, we foresee encouraging demand for this development.
• Forecasts. We make no changes to our forecasts. The project is expected to be rolled out in 2H14, and will be completed within five years from now. Therefore, earnings contribution will only kick in from FY15 onwards.
• Valuations. We maintain our BUY call on Sunway. FV is revised up slightly to MYR3.55 from MYR3.52, based on an unchanged 25% discount to RNAV. Sunway is still our favourite. Apart from its diversified property projects in Malaysia, joint-venture property developments in Singapore have, thus far, generated strong sales and profits for the company