AmResearch keeps Buy rating on Sunway

KUALA LUMPUR: AmResearch has maintained its Buy call on Sunway with an ex-dividend-in-specie fair value of RM3.74 a share.

"Our fair value also accounts for a higher net debt at the company," it said in a note on Tuesday.

The research house said Sunway has acquired 16.996 acres (740,342 sq ft) of prime land in Kelana Jaya via an open tender at a favourable rate of RM386.31/sq ft for a total of RM286mil cash.

 It targets to launch a five-year RM1.8bil mixed development there by 2H2016. It is proposing to build 7 residential blocks with a commercial podium, with a total built-up of 3mil sq ft and an ASP of RM800/sq ft. 

The land has a 4x plot ratio. The land is situated next to Western Digital in the Sungai Way Free Trade Zone and in close proximity to the Subang National Golf Club. Sunway expects to complete the acquisitions within six months.

The proposed development has a potential margin of 15%-20% margin, it said.

Notwithstanding the larger portion being leasehold (99 years), the acquisition price compares favourably to that paid by Gamuda Bhd about three years ago of RM95mil or~RM450/sq ft for a 4.86-acre parcel of freehold land in the vicinity.

Given the potential slowdown in Sunway Iskandar, this latest expansion in the Klang Valley is positive and in line with its current objective of replenishing landbank ready for immediate launch.

The acquisition brings its total landbank to 3,380 acres, of which 799 acres (24%) are in the Klang Valley. About 54% (1,830 acres) of its landbank is in Johor. 

The total potential GDV is at RM51bil (effective: RM32bil) over 15 years.

Sunway is in the midst of listing its construction arm, having just undertaken the distribution in-specie of Sunway Construction Group Bhd (SCG) shares with the stock going ex on 6 May. Upon SCG’s listing, Sunway will also distribute cash dividends.