Sunway’s S’pore land purchase positive move

Expansion mode: Sunway Pyramid is a popular landmark in the Klang Valley. Sunway is set to benefit from the robust property market in Singapore.

PETALING JAYA: Sunway Bhd’s move to jointly acquire two parcels of prime residential land in Singapore worth RM2.5bil is seen as positive in expanding the conglomerate’s exposure in the city-state.

TA Securities Research analyst Thiam Chiann Wen said the acquisition would further expand Sunway’s land bank in Singapore, allowing the group to benefit from the country’s robust housing market.

“With this development, the group’s Singapore projects account for 14% of the group’s total gross development value (GDV) of RM60.5bil. As far as the acquisition price is concerned, the land cost (inclusive of development charge) represents 55% of the total GDV.

“We think the price tag is fair, given that land cost typically makes up 40% to 60% of GDV in Singapore,” according to Thiam in a note yesterday.

On Nov 19, Sunway announced that its Singapore sub-subsidiary Sunway Developments Pte Ltd, together with Singapore-based property developer Hoi Hup Realty Pte Ltd, will be acquiring two sites on Thiam Siew Avenue, Tanjong Katong for S$815mil (about RM2.51bil).

The deal consists of 22 freehold residential plots, cumulatively spanning about six acres.

Targeted for launch in the first quarter of 2023, the sites will be redeveloped into luxury private residential condominiums.

This acquisition is Sunway’s second major acquisition in Singapore for 2021, following the 4.79-acre freehold Flynn Park site in Pasir Panjang for S$371mil (RM1.14bil) in September.

AmInvestment Bank Research analyst Lee Chin Poh is “mildly positive” on the land deal, which is expected to further enhance the earnings visibility of Sunway’s property developments in Singapore.

“Following the deal, Sunway’s Singapore-based projects now make up 77% of the group’s remaining GDV for international projects, which account for 14% of the group’s total development value of RM60.5bil.

“Based on the investment cost of S$140mil (RM431mil), the group’s net gearing level in the financial year of 2021 (FY21) is expected to increase from 47% to 51%,” stated Lee in a note yesterday.

Based on a plot ratio of 2.8, the acquisition price of S$815mil (RM2.51bil) and further development charge of S$284mil (RM873.22mil) would translate to a “fair” S$1,488 (RM4,575.20) per square foot (psf), according to Lee.

In comparison, AmInvestment Bank Research’s channel checks indicated that the Tanjong Katong land was being offered at S$1,450 (RM4,458.36) to S$1,500 (RM4,611.85) psf currently.

“We maintain our forecasts for now, pending a target launch in the first quarter 2023 with contribution expected to kick in from 2024 onwards,” stated Lee.

AmInvestment Bank Research has a “buy” call on Sunway, with a fair value of RM2.21 per share.

TA Securities Research also has a “buy” call on the conglomerate. The target price is at RM2.24 per share.

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