PETALING JAYA: The recent joint venture by Sunway Bhd to undertake an integrated development project land along Jalan Peel, group’s first land acquisition this year, is synergistic to the group as it located opposite its RM4bil Sunway Velocity development.

Analysts are bullish of the joint venture and view it as a positive development as this would increase the group’s gross development value (GDV) of its land going forward as well as have a minimal impact on its gearing level.

Hong Leong Investment Bank (HLIB) research analyst Jason Tan added he was positive on the land acquisition given its strategic location directly opposite the RM4bil Sunway Velocity development.

“We expect the proposed development to have synergies with existing Sunway Velocity which comprises of Sunway Velocity Shopping mall, medical centre and hotel. The proposed land acquisition will increase group effective total GDV by 5% to RM32.5bil, which will sustain development period over 15 years. The net present value (NPV) for the project is estimated at RM83mil or 4 sen per share.

UOB Kay Hian in a research note said the proposed joint venture to undertake the project would have a minimal impact on gearing. “Presently, Sunway’s net gearing stands about 0.52 times, with a cash pile of RM2.6bil. Post the acquisition, its gearing would only inch up to about to about 0.53 times, which is still healthy,’’ it noted.

Both HLIB and UOB Kay Hian are maintaining its buy call on the stock with a target price of RM3.75 and RM3.60 respectively.

On February 10, in an announcement to Bursa Malaysia, Sunway said its wholly-owned subsidiary, Sunway City Sdn Bhd (SunCity), had entered into a subscription and shareholders agreement with Low Peng Kiat, CRSC Property Sdn Bhd and Austral Meridian Property Sdn Bhd (AMP) to form a joint venture (JV) via AMP to undertake an integrated development project on the parcels of leasehold land owned by AMP.

The land which is located along Jalan Peel (opposite Sunway Velocity) spans about 8.44 acres.

Under the Proposed JV, SunCity shall subscribe 500,001 ordinary shares in AMP, representing 50%+1 share of the equity interest in AMP for a total consideration of RM500,001.

SunCity would also advance up to RM140mil (based on 100% stake) to repay existing shareholders and other remaining liabilities of AMP.

Based on a maximum 70% stake, the maximum consideration would be RM281.2mil, implying a RM1,024 per sq ft (psf) land price, UOB Kay Hian noted.

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