This article first appeared in Capital, The Edge Malaysia Weekly on October 21, 2024 - October 27, 2024

Target price: RM5.00 BUY

CIMB SECURITIES (OCT 14): Sunway (KL:SUNWAY) and its long-time partner Hoi Hup Pte Ltd have secured another piece of land within the mature Tampines estate in Singapore. The land was procured by the Hoi Hup-Sunway joint venture from the Housing and Development Board of Singapore for S$668 million (RM2.2 billion) or S$1,004 psf per plot ratio. This was just 1.9% higher than the second-highest bid of S$985 psf per plot ratio that was submitted by Sing Holdings Residential Pte Ltd.

Sunway’s effective share in the joint venture is 35%. Situated at Tampines Street 94, the project land (tenure: 99-year lease term) has a site area of around 23,512 sq m (5.8 acres) and a maximum gross floor area of 61,837 sq m. It will be converted into a mixed-use development with a direct underpass link to Tampines West MRT. While the indicative gross development value (GDV) has yet to be finalised, the development period will be no more than 84 months (start date: Oct 10, 2024). The project is scheduled to be launched in 1H26. We estimate the development’s pre-tax profit margin to be about 12%.

With its latest move, Sunway’s total land bank will increase to 2,372 acres. However, the group’s total GDV has remained unchanged at RM54.8 billion (effective: RM44.9 billion), as it excludes the prospective GDV for the Tampines land which has yet to be finalised. In the same way, it broadens Sunway’s presence within Tampines, which forms District 18 together with Pasir Ris estate. Sunway’s 2H24 property earnings will be supported by the handover of Parc Sentral Residences (Tampines Street 86), now fully sold, in July 2024. Based on data from Edgeprop.sg, the market value for this executive condominium project is around S$1,546 psf for a 936 sq ft unit.

Overall, the new land bank will strengthen Sunway’s position in Singapore’s property market. We maintain our earnings estimates for now, pending an update on the prospective GDV for this new project in Tampines. Maintain “buy” with an unchanged SOP-based target price of RM5.00.

Target price: RM1.20 BUY

RHB RESEARCH (OCT 14): We remain optimistic on Focus Point’s (KL:FOCUSP) optical segment, which is poised for a strong SSSG (same-store sales growth) despite the soft consumer sentiment, thanks to its effective marketing initiatives. We believe the current valuation of 8.5 times FY25F PE is attractive and unwarranted considering the company’s market leadership, strong brand equity and solid business fundamentals.

We expect strong optical revenue growth from 1H2024 to sustain into 2H24, supported by effective marketing strategies and a growing myopic population. Management highlighted the successful introduction of AirDoc AI Fundus screening technology, which uses AI to detect eye conditions and has encouraged customers to opt for higher-quality lenses.

Monthly sales from FamilyMart have risen to RM1.6 million to RM1.7 million (versus RM1.4 million to RM1.5 million). It is also supplying one Zus Coffee outlet as part of a testing phase, with management awaiting feedback for a potentially wider rollout in 4Q.

Meanwhile, Komugi’s outlet sales have shown stable performance (1H24 sales: +21% y-o-y) and it is focused on improving gross profit margin by reducing wastage. 

Target price: 37 sen SELL

TA SECURITIES (OCT 14): Gadang (KL:GADANG) has announced that its wholly-owned subsidiary Gadang Construction Sdn Bhd has entered into a conditional sale and purchase agreement with property developer Opulent Abode Sdn Bhd. The agreement involves the disposal of 10,779 sq m (equivalent to 2.7 acres) of leasehold commercial land located in Sungai Buloh, Selangor, for a total cash consideration of RM65 million (equivalent to RM561 psf). The disposal is expected to be completed by 1QCY25.

Gadang’s near-term focus remains on improving operating cash flow and reducing its debt through various measures, including the issuance of new shares via private placement. Therefore, we are not surprised by the announcement as this land disposal aligns with the group’s strategy to lower its borrowings. Notably, the disposal is expected to reduce Gadang’s interest-bearing debt from RM187.2 million as at May 2024 to RM171.5 million, bringing the gearing ratio down from 0.24 times to 0.22 times. As at end-May 2024, the group’s construction order book stood at about RM1.1 billion (equivalent to 4.1 times FY24 construction revenue), while unbilled property sales totalled RM202.3 million.

Target price: RM3.20 BUY

MAYBANK INVESTMENT BANK (OCT 14): While a stronger ringgit is overall negative to Axiata’s (KL:AXIATA) earnings, Axiata’s net debt would decline considerably in ringgit terms. With balance sheet repair being a potential re-rating catalyst in our view, a meaningful reduction in net debt-to-Ebitda (we estimate circa 2.6 times net debt-to-Ebitda as at end 3Q2024E assuming sequentially stable Ebitda) could improve sentiment on the stock. Reiterate “buy” with an unchanged RM3.20 SOP-derived target price.

A stronger ringgit is negative overall to Axiata’s earnings, with at least around 90% of Ebitda and circa 50% of core net profit being foreign-sourced, by our estimates. Some degree of organic operational growth would thus be required to offset the adverse currency-induced earnings impact in the upcoming quarters.

As highlighted previously, Robi Axiata plc in Bangladesh could potentially face operational headwinds (politics and floods) in 3Q24. Our earnings forecasts and RM3.20 target price for Axiata (derived from a SOP with each op-co valued on discounted cash flow) are unchanged, with associate CelcomDigi Bhd (KL:CDB) being the largest contributor of both earnings and SOP valuation. Axiata remains committed to a minimum 10 sen dividend per share annually.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.