AmWatch - Sunway : Acquires prime land in Kelana Jaya at RM386/sq ft BUY, 12 May 2015

STOCK FOCUS OF THE DAY

Sunway : Acquires prime land in Kelana Jaya at RM386/sq ft        BUY

We maintain BUY on Sunway, with an ex-dividend-in-specie fair value of RM3.74/share (vs. RM3.95/share previously), based on a 20% discount to the SOP value of RM4.65/share. Our fair value also accounts for a higher net debt at the company (audited FY14 numbers).

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. 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. Maintain BUY.

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Others :

SapuraKencana : Secures contracts worth RM969mil       HOLD

Puncak Niaga : Receives request for fifth extension; may raise price        HOLD

Water Sector : No end in sight yet            NEUTRAL

Plantation Sector : Palm oil inventory up by 17.6% MoM                NEUTRAL

Economic Update : Strong export orders in support of manufacturing growth in March

QUICK TAKE

Genting Malaysia : To sell investment in GenHK HOLD

NEWS HIGHLIGHTS

UEM World : In talks with Khazanah on Johor land deal

Sin Chew Media Corporation : Ming Pao eyes expansion, strategic investors

Plantation Sector : CPO output may fall by 2015 if replanting delays

Tenaga Nasional : Gets RM282m Pantai-Salak South transmission line project

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