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PETALING JAYA: Sunway Bhd’s proposed acquisition of a 4.06-acre land in Tengah Town, Singapore, through a joint venture is a welcomed development as it will strengthen the property developer’s presence in the city-state.
The deal is also seen as timely for Sunway, as it helps replenish the group’s depleting land bank in the island-state.
According to Hong Leong Investment Bank (HLIB) Research, Sunway did not have any remaining land bank in Singapore after the launch its two private condominium projects there this year.
“Thus, this land acquisition replenishes the group’s land bank in Singapore, allowing it to maintain its presence there,” the brokerage said.
HLIB Research maintained a “buy” call on Sunway, with an unchanged target price of RM2.76.
Sunway announced on Tuesday that its 35:65 joint venture in Singapore with Hoi Hup Realty Pte Ltd had won a land tender from the Housing and Development Board for a 4.06-acre land at Tengah Plantation Close for a purchase price of S$348.5mil.
The land came with a 99-year lease term for a proposed development of executive condominium over five years or less from Sept 11, 2023.
The project is expected to have 495 units, with a target launch in early 2025.
HLIB Research said the project should also enjoy brisk demand, given the strategic location with proximity to the future Tengah MRT station.
Demand for executive condominiums is expected to rise after the recent increase in additional buyer’s stamp duty (ABSD).
“We estimate Sunway’s share of profit for the project to be around RM84mil, or an earnings per share of 1.68 sen, to be recognised upon project completion, estimated to be in 2028,” HLIB Research said.
“Post-acquisition, we estimate the group’s effective remaining gross development value to increase to RM38.1mil from RM37.3mil as at Aug 31, 2023,” it added.
TA Research said it was also positive about this new development, which represented a timely addition to Sunway’s land portfolio in Singapore.
“Given ABSD for second property purchases, executive condominiums are likely to attract more interest due to their upfront remission benefits,” it said.
The brokerage maintained a “buy” call on Sunway with an unchanged target price of RM2.40.
Meanwhile, MIDF Research kept its “neutral” call on Sunway, with a target price of RM1.71.
“While we are sanguine on the expansion presence of Sunway in Singapore, upside is limited,” it explained.
As the land acquisition would be financed by internally generated funds and borrowings, MIDF Research said Sunway’s net gearing was expected to increase to 0.58 times from 0.55 times as at end-June 2023.
“We see limited impact to earnings in the near term as Sunway targets to launch the project in early 2025. Hence, we maintain our earnings forecast for 2023 to 2025,” it added.
