HLIB Research said the acquisition replenishes Sunway’s Singapore landbank after two private condominium launches in 2023.
PETALING JAYA: Sunway Bhd
’s prospects remain bright, driven by growth in its healthcare, property development, and construction segments.
Hong Leong Investment Bank (HLIB) Research said this following a successful joint bid by Sunway Developments Pte Ltd (SDPL) and Hoi Hup Realty Pte Ltd of S$423.38mil (RM1.5bil) for a 4.95 acre piece of land in Singapore.
The land located at Plantation Close, Tengah, is intended to be developed into a 99-year lease term executive condominium (EC).
“There is a possibility for Sunway-Hoi Hup to create a mega EC project by amalgamating the two adjacent sites, subject to approval by the authorities. The earlier site yields about 495 units, while the current site yields about 560 units, which in combination could result in a 1,055-unit EC.
“Sunway-Hoi Hup are now in a good position to strategically plan the launch timing and pricing of these two projects. The first launch is expected to be in early 2025,” the research house said.
Sunway, which owns Sunway Holdings Sdn Bhd, which in turn owns Sunway Developments, said it had received the award from the Housing and Development Board of Singapore.
Sunway Developments and Hoi Hup will incorporate a joint venture at a later date to undertake the development of the land, in which Hoi Hup will have a 65% stake while the remaining 35% will be owned by Sunway Developments.
HLIB Research said the acquisition replenishes Sunway’s Singapore landbank after two private condominium launches in 2023. The research house estimates an effective gross development value (GDV) of RM1.05bil and net profit margin of 10% for the project. The net profit margin of similar projects is typically around 10%.
The research house expects the share of profit for Sunway to be around RM105mil based on Sunway’s recognition of share of profit of RM46.3mil in its third quarter ended Sept 30, 2023 for its Parc Canberra project .
The Parc Canberra project was launched in February 2020 with an effective GDV of RM560mil, translating to a net profit margin of 8.3%.
“Note that for EC projects, profits are recognised only upon project completion. Thus, based on a five-year development period, the share of profit is likely to be recognised in financial year 2028 (FY28) and FY29,” it added.
HLIB Research maintained its “buy” call on the company with a higher target price (TP) of RM3.08 from RM3 after imputing TP changes from Sunway Construction Group Bhd and Sunway Real Estate Investment Trust.
“Notably, Sunway currently ranks No. 28 in terms of market capitalisation on Bursa Malaysia. While still early days yet, investors can keep an eye out for a potential inclusion of Sunway in the FBM KLCI Index,” it added.
