Apr 12, 2010

Reitrate Buy On Sunway

Sunway Holdings (RM1.56; Buy; Price Target: RM1.95;

Reiterate Buy on Sunway with a TP of RM1.95 based on our SOP-

New property JV in Puncak Jalil
Sunway has announced it has entered into a JV agreement with Monty Properties to undertake a property development project known as “Puncak Jalil” through a JV company, Geneba Dua Sdn Bhd. The land measures 16.9 acres and is located in a township in Bukit Jalil known as Puncak Jalil.

Sunway will have a 65% share in the JV. There was no mention on how much land cost or its 65% interest in the JV translates to. The existing township there known as Taman Puncak Jalil is an 801 acres integrated township near the Technology Park Malaysia along the Puchong-Sungai Besi Highway. It is just south of the National Sports Complex. Adjacent townships include Bandar Kinrara to the northwest, Lestari Perdana to the southeast and Taman Equine to the south. The developer is Talam.

The project will carry a GDV of RM120m and will be for higher-end residential terrace and semi-detached houses. Initial launches will start in 2010. Pricing power in this area  is not apparent, in our view.

A quick check showed that a 20’x70’ terrace house in the secondary market is asking for RM250,000. But this may change if IJM which has stepped in to help the ailing Talam is successful in rebranding and repositioning the whole development.

We are still somewhat positive on this venture as it shows Sunway’s commitment in beefing up its property presence in Malaysia. Recall it also acquired land in Templer Park earlier this year. Assuming pretax margins of 15% and its share in the project, this project could lift FY11 EPS by 2%. We are leaving our forecasts unchanged for now. Reiterate Buy on Sunway with a TP of RM1.95 based on our SOP-
source: HWDBS Vickers