Sunway City Ipoh has flourished with the inclusion of the Lost World of Tambun and Banjaran Hotspring Retreat.
KUALA LUMPUR: AmInvestment Research is maintaining its Buy call on Sunway, with an unchanged fair value of RM3.54a share, based on a 15% discount to its sum-of-parts value of RM4.18 a share and an implied price-to-earnings of 11 times FY16F.
It said on Tuesday this was based on the strength of its investment properties and construction division, and the long-term prospects of its property development segment.
It issued the report on news that the Perak state government has expressed its intention to take back undeveloped portion of land at the now-thriving Sunway City Ipoh, believed to be at 441 acres.
“While the latest development is a negative, the impact will not be significant,” it said.
To recap, Sunway announced that its 65% subsidiary Sunway City (Ipoh) (SCI) has received a letter from the Perak State Secretary declaring that the Development Agreement inked between them in September 1997 had lapsed.
As such, it requested SCI return the undeveloped land. SCI is disputing the notice and will refer it to arbitration pursuant to letters of the agreement.
Sunway said the matter will not have any material effect on its earnings and net assets for FY16 and beyond. SCI is 35% co-owned by Yayasan Perak and the Perak State Development Corp.
First conceived in 1995, the award-winning Sunway City Ipoh development was halted amid the 1997-1998 Asian financial crisis and was revived in 2002, and has since flourished with the inclusion of choice addresses such as the Lost World of Tambun and Banjaran Hotspring Retreat.
AmInvestment pointed out that about 65% of the township has been developed (GDV at RM1bil), with the rest to be completed by 2025. Of the 1,346 acres, only about 700 acres are net land area for development.
According to Sunway's latest landbank list, the remaining undeveloped land at stands at 440.5ha (effective: 286 acres), with a remaining GDV of RM1.05bil (effective: RM681mil). They account for 13% and 2% of Sunway group's total undeveloped land bank and remaining GDV, respectively.
The research house pointed out that it was only a year ago that SCI had unveiled projects with a GDV of over RM500mil within the next three years, consisting of an expansion at The Banjaran, an outlet mall and serviced apartments and high-end residential properties.
Sunway has set to launch the Lost World serviced apartments with a GDV of RM100mil this year. It has been reported that residential properties at the integrated township, and the surrounding areas, have appreciated by between 150% and 250% since 2004.
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