Analysts deem Sunway’s RM320m Taman Taynton land buy fair

• The acquisition is expected to boost Sunway’s gross development value (GDV) to RM58 billion with the planned RM3.2 billion development project, CIMB Securities said in a note.

KUALA LUMPUR (Oct 3): Analysts have deemed Sunway Bhd’s (KL:SUNWAY) acquisition of a 17.58-acre freehold land in Taman Taynton, Kuala Lumpur, for RM320 million as fair, citing attractive pricing and strong development potential.

The acquisition is expected to boost Sunway’s gross development value (GDV) to RM58 billion with the planned RM3.2 billion development project, CIMB Securities said in a note.

This would sustain its earnings over the next 15 years, it said.

"Backed by an indicative GDV of at least RM3.2 billion, the project to yield pre-tax margins of 15%-18%," said CIMB Securities.

CIMB Securities, which kept its “buy” call for Sunway with an unchanged target price of RM5, said the new land bank will only lead to a slight increase in its net gearing ratio to 46%, from 44% as at June 30, 2024.

Hong Leong Investment Bank (HLIB) Research is similarly positive on the acquisition given the “attractive acquisition price” with a land cost-to-GDV ratio of 10%.

In addition, the land has good highway access, an MRT station and other amenities, and demand should be good judging from the encouraging response received for Sunway Alishan, which has a take-up rate of 71% as at end-September 2024 after its launch two years ago, HLIB said in a note.

HLIB, which maintained a “buy” call for Sunway with a higher target price of RM5.15 (RM4.51 previously), said the group’s net gearing would increase slightly to 55.3% after the land acquisition, from 53.2%.

Assuming RM3.2 billion GDV over a development period of 11 years and a net profit margin of 18%, the project is expected to yield approximately RM52.4 million in net profit per annum starting from FY2027.

The research firm has maintained its earnings forecast for Sunway, anticipating Sunway to deliver annual earnings of RM727.4 million for FY2024, followed by RM736.8 million for FY2025 and RM960.3 million for FY2026. For FY2023, the group posted an annual net profit of RM737.8 million. 

TA Securities Bhd also deemed the land acquisition price to be "fair" and is confident the new property development will attract strong interest.

The planned GDV of RM3.2 billion development on the land consists of integrating “opulent” serviced apartments with a “wellness-focused” retail podium featuring health and wellness clinics.

“Its wellness-centric retail component, combined with Sunway’s trusted brand and proven track record in delivering healthcare and wellness services, will effectively meet residents' needs and enhance the project's appeal.

“Furthermore, the upcoming direct access to the MRR2 (Middle Ring Road 2) is expected to significantly enhance connectivity, making it an attractive choice for potential buyers," TA Securities said. 

TA Securities has maintained “buy” on Sunway with an unchanged target price of RM4.76.

At noon market break, Sunway’s share price rose four sen or 1% to RM4.17, bringing the group a market capitalisation of RM23.89 billion. Year-to-date, the stock has doubled from RM2.06.

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