Market talk: Sunway-SunCity next on the consolidation card

KUALA LUMPUR: Following the onslaught of mergers and takeovers in the property development sector, market talk has it that next on the consolidation card is Sunway Holdings Bhd and Sunway City Bhd (SunCity) after the voluntary request from both groups for a suspension in trading on Tuesday, Nov 23.

Both outfits are expected to make an announcement today, as the trading suspension is expected to end at 5pm today. So far, two major consolidations have been announced this month starting with UEM Land Holdings Bhd's RM1.39 billion takeover of Sunrise Berhad to build the largest property conglomerate in the country. Just on Tuesday, IJM Land Bhd and Malaysian Resources Corporation Bhd announced a proposed merger where a new company will be formed.

As of Monday, Sunway Holdings' share price was at RM2.25, giving it a market capitalisation of RM1.36 billion. Meanwhile, SunCity was suspended at RM4.49, representing a nine-year high. This translates into market capitalisation of RM2.11 billion.

Currently, Sunway Group founder Tan Sri Datuk Sri Dr Jeffrey Cheah Fook Ling is the largest substantial shareholder in both outfits. The government of Singapore, through the Government of Singapore Investment Corporation Pte Ltd is a substantial shareholder in SunCity with a 21.28% stake.

Of the two, SunCity benefited recently from unlocking its assets' value through the listing of Sunway Real Estate Investment Trust (SunREIT) on Bursa Malaysia in June this year. According to a recent note by OSK Investment Bhd, SunREIT is the largest Malaysian REIT with an asset size of RM3.7 billion and a free float of around RM1.6 billion. Sunway City is the largest shareholder with a 37% stake.

Post listing of Sunway REIT, SunCity's position has strengthened due to the net proceeds from the disposal of its assets into the REIT.

"With the successful listing of SunREIT, the group is now in a strong position to gear up for land acquisitions. The group received a net proceed of RM500 million, after settling its debt (about RM800 million)," said AmReseach in a note last month.

SunCity had recently expanded its landbank by acquiring 32.78ha of land for RM38.76 million in Penang. The gross development value of the residential property project is estimated at RM800 million.

For 2QFY10 ended June 30, the group recorded RM262.3 million in revenue with net profit of RM71.7 million. Its net asset per share rose considerably to RM5.21 from RM4.62 as of Dec 31 last year.

Meanwhile, for 2QFY10, Sunway Holdings recorded revenue of RM509.2 million with a net profit of RM48.6 million.