Analysts neutral on Sunway’s executive condominium land parcel award in Singapore
KUCHING: Analysts are generally neutral on Sunway Bhd’s (Sunway) executive condominium land parcel award in Singapore given that this latest development will have minimal impact to the group’s property realised net asset value ( RNAV) and earnings in the near term.
In a filing on Bursa Malaysia, Sunway announced that the Housing and Development Board ( HDB) of Singapore had on September 10, 2018, awarded a land parcel measuring approximately 4.46 acres at Canberra Link, Sembawang, Singapore for a 99-year lease term Executive Condominium Housing Development at S$ 271 million (about RM817.17 million) to Hoi Hup Realty Pte Ltd ( Hoi Hup) and Sunway Developments Pte Ltd ( SDPL) following a successful tender for the land jointly submitted by the parties.
The research arm of Kenanga Investment Bank Bhd ( Kenanga Research) was neutral on the land bank replenishment as it has minimal impact to Sunway’s property RNAV.
“This marks the second land bank replenishment in 2018 after Brookvale Park in February 2018,” Kenanga Research said.
“We laud Sunway for its land banking activity in Singapore as they are one of the few developers in town that is land banking instead of selling land as seen in other developers weathering the weak property sentiment in Malaysia.”
“We are relatively comfortable with Sunway’s move in Singapore as most of their new projects are executive condos, which demand appears to be more resilient as it falls under the HDB scheme.”
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) was also neutral on the land award.
“We are neutral on the land award as the earnings impact from the land award would be minimal in the near term,” MIDF Research said.
“Project on the land is expected to launch in 2020 while development profits from the project will only be recognised upon its completion.”
The research arm noted that proposed development on the land is 500 units of Executive Condominium Housing Development with indicative gross development value (GDV) of more than S$ 500 million.
“The land award is expected to marginally impact balance sheet of Sunway.”
“Net gearing of Sunway is expected to climb to 0.51-fold from 0.48-fold as of June 2018.”
Looking ahead, Kenanga Research believed Sunway is ontrack to meet management and the research arm’s sales target of RM1.3 billion and RM1.4 billion, respectively, due to the encouraging take-up rates in both local and overseas project.
Kenanga Research recapped that Sunway’s Singapore project Rivercove received full take- up upon its launching in April 2018 while the group’s local project Geolake and Citrine Lakehomes’ sales and bookings are currently at 60 to 70 per cent.
“Property unbilled sales of RM1.5 billion with one-year visibility and a vigorous outstanding orderbook of RM5.8 billion provide two to three years’ visibility.”