Stocks With Momentum: GIC’s Sunway stake disposal ‘timely’

by **Cals** Thu 06 Nov 2014, 18:45

Stocks With Momentum: GIC’s Sunway stake disposal ‘timely’

KUALA LUMPUR: Analysts are “not overly concerned” about Singapore sovereign wealth fund GIC Pte Ltd’s (GIC) decision to let go of its stake in Malaysian conglomerate Sunway Bhd (Sunway) that is worth more than RM400 million, viewing it as a timely profit-taking move.
An analyst with a local investment bank said it would be “a bit silly” for GIC not to realise its gains from investing in Sunway after holding on to the shares since “the early days”.
“If you look at it from the seller’s perspective, it is a question of how much more GIC can gain in incremental value if it continues to hold on to its Sunway stake for the next couple of years versus how much gain GIC will be realising when it sells all of its shares now,” she explained.
“I think it would be a bit silly for GIC not to take profit at this point when the share price has gone up many folds from its investment in the early 1990s and [as] Sunway’s assets are being listed one by one,” she added.
She said GIC started reducing its stake in Sunway after it started to “spin off” some its most valuable assets by listing its business arms separately on Bursa Malaysia.
In 2010, Sunway listed Sunway Real Estate Investment Trust ([You must be registered and logged in to see this image.] Financial Dashboard) and injected its collection of shopping malls, hotels and office towers into it.
In September 2014, Sunway Bhd proposed the listing of its construction unit Sunway Construction Sdn Bhd on Bursa Malaysia by the second quarter of 2015.
A secondary reason for GIC’s decision to pull out of the Malaysian property-cum-construction player is the exposure both of the companies have in the Iskandar Malaysia development in Johor.
“GIC and Sunway both have huge exposure to the Iskandar Malaysia development. By selling its stake in Sunway, GIC is actually limiting that exposure and that makes sense too,” she said.

This article first appeared in The Edge Financial Daily, on November 6, 2014.