KUALA LUMPUR: Analysts are positive on Sunway Bhd’s property arm, Sunway Property’s acquisition of a 245 acres of freehold industrial land in Kuang, Rawang for RM115mil.
Sunway will build industrial and commercial properties with a gross development value (GDV) of at least RM2bil across the 245 acres of prime freehold land in Rawang.
“We are positive on the acquisition given the strategic location of the land with good connectivity to KLIA and Port Klang, fair acquisition price, attractive industrial segment benefitting from strong FDI flow trend, and the venture allows the group to diversify its revenue stream,” Hong Leong Investment Bank (HLIB) Research said.
The research house deems the acquisition price to be fair. The land cost is RM115mil, implying a land cost-to-GDV of 5.8%.
However, it noted that the land is an agricultural land and as such, Sunway will have to convert the land from agricultural to industrial.
“We understand that the conversion premium for this land is most likely 20%. From our checking via iProperty, the asking price of bare industrial land in the Kuang, Rawang area ranges from RM1-1.65mil per acre, which translates to a converted land cost-to-GDV in the range of 8.2%-9.8% based on 20% conversion premium,” it said.
HLIB has maintained its “buy” call on Sunway with a target price of RM2.65 based on SOP-derived valuation.
“Sunway remains our top pick given its synergistic business model which allows each of its individual business segments to integrate and tap into its vast business ecosystem, giving them a platform to thrive and grow beyond it,” it added.
Meanwhile, TA Securities is optimistic about the proposed acquisition as it aligns strategically with Sunway's expanding industrial development portfolio.
It added that the demand for smart industrial facilities remains robust due to the growing adoption of Industry 4.0 practices.
“The land price of RM10.80 per square foot (psf) signifies a substantial discount when compared to the prevailing asking price of around RM20-30 psf for freehold agricultural land in Kuang, Rawang.
“Moreover, it also represents a discount in comparison to Gamuda's RM15.50 psf purchase price for its 532-acre land in Kundang Jaya Rawang earlier this year,” TA said.
Overall, TA considered the land acquisition cost to be reasonable, as it implies an effective land cost to GDV ratio of 14-16% based on the estimated GDV of RM2.0bil.
This calculation includes a 25% conversion premium on the estimated market value of RM640-854mil, assuming an industrial land market value of RM60-80 psf in Rawang.
TA maintained its “buy” call on Sunway with an unchanged target price of
RM2.27, based on SOP valuation.