KUALA LUMPUR: Kenanga research is positive on Sunway's 6.16 acre land tender win in Tampines, Singapore, for a purchase consideration of S$434.5mil.
"Based on their indicative GDV of S$800mil, the price is deemed fair as it represents land cost to GDV ratio of 54% which is typical for Singapore projects," it said in a Thursday research note.
To recap, Sunway announced yesterday that its 35:65 joint venture with Hoi Hup Realty put in the winning bid for the land from the Housing & Development Board.
Kenanga noted that the land is in the executive condo scene, which has resilient demand in Singapore due to its potential for being converted from Housing & Development Board to private condo status.
"Based on our back-of-the envelope calculations, they would need to price the product at an average selling price of SGD1,400psf to achieve an estimated GDV of SGD800.0m, which we believe is still palatable as private apartments in Tampines are priced at that range of between SGD1,300-1,400psf.
"This replenishment would boost its total GDV from RM54.4b to RM56.8b, and we believe that they should be able to maintain their net gearing at 0.45x level given the recent disposal of its education asset," it said.
The research house addded that the land acquisition, made at an associate level, would keep the impact off-balance sheet.
For its FY2019 outlook, Kenanga said Sunway is planning to launch RM2bil worth of products, of which RM1bil is from Singapore, and also intends to achieve sales of RM1.3bil.
Meanwhile, property unbilled sales of RM2.1b with 1-year visibility and a vigorous outstanding order-book of about RM5.6b provide two to three years’ visibility.
Kenanga downgraded Sunway to market perform with an unchanged target price of RM1.50 given its recent run-up in share price.
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