HLIB Research maintains its earnings estimates for Sunway.
PETALING JAYA: Analysts are bullish on Sunway Bhd
’s new acquisition of a freehold land in Taman Taynton in Kuala Lumpur, due to its strategic location and attractive offerings.
The acquisition of the 17.58 acres of land is worth RM320mil and is expected to be completed by the second quarter of 2025.
Hong Leong Investment Bank (HLIB) Research stated that the proposed development on the land consists of serviced apartments and neighbourhood retail outlets with an indicative gross domestic value (GDV) of at least RM3.2bil.
“The acquisition price translates to a land cost-to-GDV ratio of 10%, which we deem attractive, especially for a prime location in Kuala Lumpur,” HLIB Research said.To gauge the demand for the new project, HLIB Research suggested looking into the sales performance of Sunway Alishan Residences, which is located adjacent to the recently acquired land.
With an average selling price of RM1.12mil per unit, above RM700 per sq ft, the brokerage noted that Sunway Alishan still managed to achieve a good take-up rate of 71% as at end of September this year.
This encouraging response leads to HLIB Research’s expectation of good demand for the development on the newly acquired land.
The research house maintains its earnings estimates and “buy” call on Sunway, with a higher target price of RM5.15 per share.
Aside from being strategically located next to the ongoing Sunway Alishan project, TA Research explained that the recently acquired land also enjoys proximity to key amenities within a five-km radius and highly accessible public transportation options.
“Additionally, we understand that Sunway plans to build direct access from the site to the Middle Ring Road 2 (MRR2), enabling seamless connectivity to major highways such as the Shah Alam Expressway, Grand Saga Highway, East-West Link Expressway and Maju Expressway.
“The upcoming direct access to the MRR2 is expected to significantly enhance connectivity, making it an attractive choice for potential buyers,” it said.
TA Research also believes that the project’s focus on wellness in its luxury serviced apartments and retail offerings will effectively meet residents’ needs and enhance the project’s appeal.
The brokerage has made no changes to its financial year 2024 (FY24) to FY26 earnings forecasts for Sunway. It retains its “buy” rating with an unchanged target price of RM4.76 per share.
Echoing the sentiments of the others, CIMB Research deems the land cost-to-GDV ratio of 10% as fair, given its strategic location within a well-established neighbourhood and good accessibility
Since the development will be carried out over 11 years and is scheduled to be launched in early 2027, the research outfit estimates the project to yield pre-tax margins of 15% to 18%.
“With this latest land acquisition, we project that it would bump up Sunway’s remaining GDV to RM58bil and sustain its earnings over the next 15 years or so.
“Based on our initial calculations, the new landbank will only lead to a slight increase in its net gearing ratio,” it added.
CIMB Research also maintains a “buy” call on Sunway, with an unchanged target price of RM5 per share.
