Sunway Bhd
(Dec 20, RM2.97)
Maintain neutral with an unchanged target price (TP) of RM3.25: We had a site visit to Sunway Velocity Mall in Cheras recently following the opening of the mall on Dec 8. Sunway Velocity Mall is part of the Sunway Velocity project spanning 23 acres (9.31ha). The project is a vibrant integrated development, which comprises office and retail projects, residential projects, Sunway Velocity Hotel and Sunway Velocity Medical Centre. Sunway Velocity is located 4km away from Kuala Lumpur City Centre and with direct links to two upcoming underground mass rapid transit stations.

Sunway Velocity Mall has net lettable area (NLA) of 880,000 sq ft, while the secured occupancy rate stood at 90%. We gather that anchor and mini anchor tenants of the mall include Parkson, TGV Cinemas, AEON, MaxValue, Grand Imperial and Harvey Norman. We were pleasantly surprised by the high occupancy rate of the mall given concerns about oversupply of retail spaces in Cheras where the upcoming MyTOWN Shopping Centre with NLA of 1.1 million sq ft is 1.5km away from Sunway Velocity. We believe Sunway Velocity Mall should continue to enjoy high occupancy rates going forward given the expertise of Sunway Bhd in managing shopping malls and good connectivity of Sunway Velocity.

On other projects in Sunway Velocity, we gather that Sunway Velocity Hotel, which is a four-star business hotel, is under construction and due for opening by the second half of 2017. On the other hand, Sunway Velocity Medical Centre with 240 beds is currently under construction with a targeted opening in the fourth quarter of 2018.

We maintain our earnings forecasts for the financial year ending Dec 31, 2016 (FY16) and FY17 as we had already inputted the earnings contribution from Sunway Velocity Mall to our earnings forecasts. We also maintain our TP for Sunway Bhd at RM3.25, based on sum-of-parts valuation. We are keeping our “neutral” stance on Sunway due to the overall subdued property market outlook. — MIDF Research, Dec 20