Full control of Sunway South Quay seen positive for Sunway

PETALING JAYA: Analysts are positive on Sunway Bhd’s move to acquire the remaining 20% stake in Sunway South Quay Sdn Bhd, as the full ownership of the latter will increase the group’s future earnings.
The move is following the group’s recent acquisition of 20% stake in Sunway South Quay from Kuwait Finance House (Malaysia) Sdn Bhd on Oct 10, 2017.
Sunway South Quay, a mixed development, is located in the integrated township of Sunway City with remaining gross development value (GDV) of RM3 billion.
MIDF Research said the increased stake in Sunway South Quay also affirmed the group’s confidence and commitment to the long-term prospects of the project.
The research house expects the impact from the acquisition on the group’s balance sheet and earnings would be minimal, hence it maintained its earnings estimate for FY17-FY18.
Sunway intends to fund the RM210 million stake acquisition from Employees Provident Fund (EPF) via bank borrowings and internally generated funds.
“We estimate net gearing of Sunway to be lifted marginally to 0.37 times from 0.32 times as at end June 2017 after taking full ownership of Sunway South Quay. Likewise, earnings impact from the acquisition is also expected to be minimal, hence we maintain our earnings estimate for FY17-18F,” said MIDF Research, which kept its “neutral” stance on Sunway with a revised target price of RM1.84 from RM1.83 previously, after factoring full ownership of the project.
Meanwhile, HLIB Research maintained its target price for Sunway at RM2.25 with a “mildly positive sentiment”, pending more details on the incremental profitability of the increased stake in the project.
“Sunway is our top pick within the sector as we believe it should be rerated and trade closer to its peers such as IJM Corp Bhd and Gamuda Bhd given its diversified income stream and declassification from property sector.
“At a forward P/E of 13t times as compared to peers, we opine that it is a deep value stock with mature investment properties and the underappreciated trading and healthcare segments,” it said.
Sunway shares fell one sen or 0.6% to RM1.68 today on some 5.65 million shares done.