Sunway’s latest Singapore joint venture poised to be well-received

SUNWAY Bhd’s successful bid for another development project in Singapore has received thumbs up from RHB Research given its recent projects in the island nation have been thus far been well-received.

Given the location of its latest site and Singapore’s tighter control over COVID-19 infections there, demand for its units should be encouraging, according to RHB Research.

“Despite the potential downside risk to near-term earnings, we remain confident on Sunway’s fundamentals and long-term growth prospects,” justified analyst Loong Kok Wen in a company update.

Yesterday, Sunway announced that the company (30% stake) together with its partner Hoi Hup Realty (70% stake) has won a bid for the en bloc acquisition of Flynn Park – a condominium development along Yew Siang Road in Pasir Panjang – at a price of S$371 mil (RM1.15 bil).

The existing condominium block called Flynn Park sits on 4.79 acres of freehold elevated land, with an allowable gross plot ratio of 1.4.

“The acquisition cost of S$371 mil translates to a land cost of S$1,355 per sq ft per plot ratio. Based on our rough estimate, the ASP (average selling price) of S$2,300-2,400 per sq ft should be quite reasonable for the area, hence the consortium should still be able to earn a decent margin from the re-development.

“We are optimistic that this will be another successful project by the Sunway-Hoi Hup consortium. The recently launched projects – Parc Central in Tampines and Ki Residences at Brookvale – have enjoyed a good response with the latest take-up rates being at 85% and 60% as of end-August,” noted RHB Research.

“As such, the re-development of Flynn Park would ensure the continuity of Sunway’s presence in the Singapore property market. The new site will be redeveloped into a modern private residential condominium project (GDV: S$750 mil), leveraging on its hillside location and close vicinity to the city centre and public transportation facilities.”

All-in-all, RHB Research maintained a “buy” rating on Sunway with a sums-of-part (SOP)-based target price of RM2.

However, Maybank IB Research – while positive on Sunway’s latest joint venture project in Singapore for its strategic location – noted that the project will only start contributing to earnings from 2024 onwards.

“It is likely to enhance our RNAV (revised net asset value) by +1sen. No change to our earnings forecasts and target price of RM1.73 but we upgrade Sunway to “hold” (from “buy” previously) as the stock is fairly priced with a total return of <1%,” justified the research house.

At 11.10am, Sunway was up 1 sen to RM1.76 with 55,600 shares traded, thus valuing the company at RM8.68 bil. – Sept 14, 2021

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