GIC sells Sunway shares

Shopping at Sunway Pyramid.At dusk, the lights dazzle with Pyramid like a city.

THE final block that GIC Pte Ltd (GIC)held in Sunway Bhd worth RM482mil was sold on Wednesday, indicating the Singapore sovereign fund’s exit from its investment in the latter.

It is learnt that a number of top Malaysian government-linked companies’ funds bought most of the shares that GIC divested.

Some 30 investors, which include international buyers, took up the block worth RM482mil. The shares were priced at RM3.20 to RM3.30 each.

Industry observers opine that the investment is no longer strategic for GIC, which invested earlier in Sunway’s crown jewels – Sunway Hotel and Sunway Pyramid mall. In 2000, GIC bought a 48% stake in Sunway Pyramid mall.

A source says: “GIC has wanted to get out for some time… The stake was no longer strategic for the fund.”

GIC was looking to pare down its investment in Sunway as the group has injected its valuable assets into Sunway Real Estate Investment Trust (REIT).

In mid-2010, Sunway group injected Sunway Pyramid mall, Sunway Resort Hotel & Spa, Pyramid Tower Hotel and SunCity Ipoh Hypermarket, into the REIT that was worth some RM2.6bil upon listing.

GIC was among the cornerstones and took up 5% in Sunway REIT’s initial public offering. However, it has sold off the stake subsequently.

The fund also owned more than 20% in Sunway City Bhd (SunCity), the property arm of the group before it was merged with Sunway Holdings Bhd three years ago.

Post merger, GIC’s stake was diluted to about 12.22% in Sunway Bhd.

On Oct 4 last year, GIC sold 60 million Sunway shares, reducing its stake to 8.74%.

Following GIC’s latest disposal of 150.66 million shares or 8.74% in Sunway, the fund ceased to be a substantial shareholder in Sunway.

The Singapore sovereign fund has made other investments in Malaysia. They included: a 70% stake in Johor Baru City Square, a substantial stake in Menara Standard Chartered and RB Land Sdn Bhd.

An analyst points out that the sale of Sunway shares by GIC was expected to remove the overhang of the stock.

Another educational guess is that GIC wants to reduce its exposure in the Johor property market as the fund is already invested in the southern state.

The relationship between Sunway and GIC has gone a long way.

One of Sunway’s Singaporean independent non-executive directors, Lim Swe Guan, had served the real estate arm of GIC Pte Ltd from 1997 to early 2011, according to its 2013 annual report.

Sunway’s partnership with GIC is believed to be beneficial for the conglomerate’s real estate ventures in Singapore.

As of September, its property ventures across the causeway are worth RM7.74bil in gross development value (GDV).

Most of the projects are carried out under Hoi Hup Sunway Development Pte Ltd, a 30:70 joint venture between Sunway and Singapore-based Hoi Hup Realty Pte Ltd.

Among others, its ongoing projects are mixed development Royal Square, Novena with a GDV of S$915mil and residential development Mount Sophia with a GDV of S$822mil.

Sunway’s presence in the city-state can be dated back to 2007.

It is believed that Sunway has benefited from its relationship with GIC for its footing in Singapore.

On Wednesday, it announced that its wholly-owned subsidiary, Sunway Holdings Sdn Bhd, is acquiring the 30% stake in Hoi Hup Sunway Development Pte Ltd for S$300,000 from its indirect wholly-owned subsidiary, Sunway Concrete Products (S) Pte Ltd.

This is part of the reorganisation plan to carve out its Singapore property business to Sunway Holdings, which is a part of its corporate exercise to spin off its construction arm.

The proposal also entails the disposal of Sunway Construction to the new listed construction firm, Sunway Construction Group Bhd (SCG), via a proposed distribution by way of dividend-in-specie of at least 13.3% of SCG shares to existing Sunway shareholders.

Sunway shareholders will get one SCG share for every 10 Sunway shares held.

On top of that, it will offer 31% SCG shares for sale.

Founder and chairman Tan Sri Jeffrey Cheah says in a statement that the main reason for the proposed SCG floatation is to unlock the value of Sunway Construction and distribute part of the benefits to its shareholders.

“Besides the proposed distribution-in-specie, a special cash dividend will also be declared and distributed to the shareholders of Sunway from the proceeds of the proposed offer for sale of SCG shares,” he says, adding that the listing will allow SCG to gain greater visibility as a top construction player in Malaysia.

SCG is estimated to worth between RM1.4bil and RM1.65bil for the new listing.

Sunway’s construction orderbook was RM3.4bil as of July 31, of which 27% is made up of internal jobs. It has also clinched mass rapid transit and light rail transit contracts.

The relisting is slated for the second quarter next year.

It is to be noted that Sunway has undergone a few restructuring exercises before this.

According to its website, Sunway Holdings was listed in 1984, followed by SunCity in 1996 and Sunway Construction in 1997.

Seven years later, Sunway Construction was privatised by Sunway Holdings.

In 2011, Sunway Holdings was merged with SunCity and became the company it is today.

When the enlarged company was listed, its market cap was RM3.5bil and now it is close to RM5.5bil.

Before the announcement of the merger in late 2010, Sunway Holdings and SunCity’s market cap stood at RM1.42bil and RM2.16bil, respectively.