AmInvestment maintains Buy on Sunway, TP at RM1.99

KUALA LUMPUR: AmInvestment Bank research has maintained its buy call on Sunway Bhd with an unchanged fair value of RM1.99 following its proposal to acquire the entire equity interest in Sterling Paradise Sdn Bhd for RM15mil.

The research house is positive on the development as it will help to sustain Sunway’s property earnings over the medium term. “However, we made no changes to our FY19–21 earnings forecasts as the project is still in the planning stage,” it said.

To recap, Sterling Paradise had previously signed a sales and purchase agreement with Meraki Land Sdn Bhd to acquire 47 parcels of freehold land measuring about 11.8 acres in Mutiara Bukit Jalil, which come with an approved development order.

Meanwhile, Sunway is planning a RM800mil GDV mixed development for the upper-middle income group, which is expected to commence in 2HFY20 and will be developed over six years.

The purchase consideration is 15% of the GDV of Sunway’s planned mixed development, less a fixed sum of RM36.7mil and 25% of the pre-tax profit above RM145mil from any development undertaken on the land.

“Based on our estimate, the land cost is calculated at RM98.3mil (RM191psf) which includes the acquisition of Sterling Paradise SB of RM15mil while excluding the 25% of PBT sharing and fixed sum of RM36.7mil.

“The cost-to-GDV ratio of 12.3% is considered low as compared with the average of 15% for high-rise mixed residential/commercial developments in Klang Valley,” said AmInvestment.

Source: TheStar