Hong Leong keeps ‘buy’ for Sunway on Japanese JV

by **Cals** Fri 25 Oct 2013, 12:58

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Friday, 25 October 2013 11:03

KUALA LUMPUR (Oct 25): Hong Leong Investment Bank Research has maintained its ‘buy’ call on Sunway Bhd shares at RM2.96 with unchanged target price (TP) of RM3.35 in light of the diversified entity’s joint venture (JV) with a Japanese developer to develop land.

Yesterday, Sunway announced that it had via its unit Sunway South Quay (SSQ) entered into an agreement with Mitsui Fudosan to jointly develop a 27,520 sq m (6.8 acres) land owned by SSQ itself.

In a note today, the research house said it is maintaining ‘buy’ call on Sunway despite the potential headwinds from the property tightening measures and slower contract flows.

It said, Sunway’s recapitalised balance sheet and large order book would be able to sustain earnings growth; hence TP is also maintained at RM3.35 based on sum of parts valuation.

“We are positive on the JV as it will allow quicker monetisation of Sunway’s new launches,” said Hong Leong IB research analyst Jarod Soon, adding, “This is evidenced by the soft launch last week which saw 70% bookings for its first tower block.”

“Going forward, this fruitful collaboration may also prove useful in attracting foreign investors for its new Sunway Iskandar township as well as other developments.”

Soon said he believes Sunway will have no problem in achieving its RM1.1 billion new sales target for FY13, pointing out that it had secured RM491 million in new property sales, which makes up 44.6% of the sales target.

He added that Sunway’s unbilled property sales as of 1H FY13 stood at RM1.8 billion, which translates to two times FY12’s property revenue.

“We also maintain our forecasts as the potential new property sales are already factored in,” said Soon.