Analysts slightly positive on Sunsuria’s deal with Genlin

KUCHING: Analysts are slightly positive on Sunsuria Bhd’s (Sunsuri) deal with Genlin Development Sdn Bhd (Genlin) but do not expect any significant to the group’s portfolio.

Sunsuria’s board of directors announced in a filing on Bursa Malaysia that the group’s 99.99 per cent- owned direct subsidiary, Sunsuria Gateway Sdn Bhd (Sunsuria Gateway), had on July 26, 2017 entered into a shareholders agreement with Genlin to mutually cooperate with the common interest to develop two pieces of freehold land measuring total area of approximately 2.23 acres located at Sentul, Kuala Lumpur.

Sunsuria noted that this will be done via Sunsuria Gateway’s wholly- owned subsidiary Goodwill Signature Sdn Bhd ( Goodwill Signature), which has been identified as the joint venture vehicle between Sunsuria Gateway and Genlin to undertake the development of the land.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was slightly positive on the deal, but the impact was neutral to its revalued net asset valuation (RNAV) estimate as it had built in RM700 million gross development value (GDV) replenishment.

“We were not surprised as management had previously indicatedthattheyareaggressively eyeing suitable land in the Greater Klang Valley region, while we do not expect any significant impact to Sunsuria’s portfolio as the acquisition is fairly small.

“The project is slated to be a mixed development (which are serviced apartments and retail units), but project details are still scarce with management yet to guide on the finalised development plans and potential GDV,” Kenanga Research said.

As such, the research arm assumed a conservative land cost to GDV ratio of 15 per cent, versus the group’s land cost to GDV ratio of eight per cent.

It estimated total project GDV to be RM187 million (RM131 million based on 70 per cent stake), which made up only one per cent of Sunsuria’s total remaining GDV of RM10.3 billion.

Aside from Sunsuria’s launch of Olive at Sunsuria City and Bell Suites in financial year 2017 (FY17), Kenanga Research expected the group to launch a total of RM1.57 billion in GDV in FY17, suggesting that most launches will be back loaded towards the second half of 2017 (2H17).

“The bulk of FY17-18 launches will be affordable high-rise or mid-market landed residential priced below RM700,000 per unit from Sunsuria City, a segment that is more readily digestible by the current market,” it said.

The launch date is yet to be finalised, but Kenanga Research anticipated it could happen in end FY18 or FY19, and as such made no changes to its estimates.

The research arm noted that going forward, FY17E net gearing would remain unchanged at 0.14fold, while FY18E will increase marginally to 0.15-fold, from 0.13fold previously.