KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) anticipates that demand for Sunway Bhd's ongoing and upcoming projects in Singapore will be favourable, especially as funding costs for housing purchases are expected to decrease.
In a research note today, HLIB also anticipates improving buyer interest ahead for Singapore's property market following the rate cut cycle by the United States Federal Reserve (Fed), which started in September.
"Given that Singapore's interest rates tend to track closely to those of the United States, we expect the former to also decline. Most home mortgage loans in Singapore are at floating rates," it said.
As such, the bank has maintained its "Buy" recommendation with an unchanged target price of RM5.15 based on sum-of-parts (SOP).
It added that the group's prospects remain bright, anchored by three main growth pillars, namely healthcare, property development, and construction.
With the group's widening exposure to the Malaysian economy, the stock provides a good proxy for the domestic economy, which is currently entering a new phase of growth.
HLIB noted that Sunway and Hoi Hup Pte Ltd were awarded a land parcel measuring 2.35 hectares at Tampines Street 94, Singapore, by the Housing and Development Board of Singapore (HDB) for a purchase price of SGD668.3 million (or RM2.19 billion).
"The gross development value (GDV) for the project is yet to be determined, while the first launch is targeted for the first half of 2026 (1H 2026)," it said.
Additionally, Sunway and Hoi Hup have also launched two private condominium projects in 2023 – Terra Hills (GDV: SGD845 million, current take-up rate: 43.3 per cent) and The Continuum (SGD2.2 billion, current take-up rate: 49.3 per cent).
The bank noted that the current winning tender should replenish Sunway's pipeline in the private condominium space.
"Other than this, Sunway-Hoi Hup is expected to launch one out of the two executive condominiums (EC) projects in Tengah Town in the early financial year 2025 (FY2025).
Sunway is expected to recognise lumpy profits from its completed EC project – Parc Central Tampines – in the third quarter of 2024 (3Q 2024), likely in the range of RM120-130 million," it said.