Sunway Holdings (Maybank IB Research) maintain buy; target price RM2.85

5th property development in Singapore

Maintain Buy. Sunway’s 5th property project in Singapore strengthens its presence in the island state. It has won a tender for another piece of land at Jurong together with its “old” partner Hoi Hup for SGD131.6m.

We estimate SGD328m GDV and RM28m net profit contribution. There is no change to our earnings forecasts as we await details.

Sunway is a Buy with a RM2.85 price target (11x 2011 PER). Its merger with SunCity at RM2.60 per Sunway share is long-term positive.

Fifth development in Singapore. Hoi Hup Realty Pte Ltd – Sunway – SC Wong Holdings Pte Ltd has won the tender for a piece of land at Yuan Ching Road for SGD131.6m (RM314.9m) from the Housing and Development Board (HDB) of Singapore. The land has a 103-year lease term.

Sunway has a 30% stake in the consortium while Hoi Hup holds the larger 60% and SC Wong, 10%. Hoi Hup is Sunway’s partner for all existing four land developments in Singapore.

Design, build and then sell? The project would be undertaken on a design, build and sell scheme, reported the Singapore press. The Sunway consortium is one of six bidders for the land. Its bid is the highest, 5% above the next highest bid of SGD125.3m.

The land size is around 21,200 sq m with a maximum gross floor area (GFA) of 63,599 sq m.

The development will be for public housing with about 580 units being offered. Construction, to start immediately, is over 48 months.  RM788m GDV potential? The land is located at Jurong, Singapore’s south-west.

The units could sell at SGD600 psf, the Singapore press quoted. Assuming 50,900 sq m of saleable floor area (80% efficiency ratio), we estimate a GDV of SGD328m or RM788m. Assuming 12% net margin, this development could contribute RM28m in net profit to Sunway (4.6sen EPS) over the 2 years of development.

These are our indicative figures; our forecasts are unchanged for now.

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