KUALA LUMPUR (Feb 14): Sunway Bhd (KL:SUNWAY) is getting one of the hottest addresses in Johor at a reasonable cost, analysts said, after the property developer signed a deal for the state’s first transit-oriented development.

Shares of Sunway extended their gains on Friday as investors and analysts cheered the deal. Sunway Construction Group Bhd (KL:SUNCON), its construction arm widely tipped to be appointed for the mixed-use development, also rose further on Bursa Malaysia.

At RM450.8 million in cash for the rights to a 4.2-acre land in Johor Bahru, the cost translates into 17% of the project's gross development value of RM2.6 billion — below the 20% ratio generally considered attractive for property developers in urban locations, analysts said.

The price tag appears “attractive, given its prime location and role as a major cross-border transit hub”, said TA Securities. The development is expected to benefit from high commuter traffic, growing demand for transit-linked properties, and proximity to Singapore, the research house said.

On Thursday, Sunway said it has signed a master agreement for the project adjacent to the upcoming Bukit Chagar station under the Johor Bahru–Singapore Rapid Transit System.

The project involves four residential and commercial towers, and it would also get the right to build a shopping mall and a hotel. The project is also expected to feature educational institutions and a ‘health and wellness’ hub.

“We expect strong demand for residential units given the ultra-prime location,” said Hong Leong Investment Bank. The project’s commercial components, meanwhile, would benefit from “multi-decade growth prospects” of Johor Bharu’s emerging central business district, the research house added.

Sunway currently has five ‘buy’ calls, six ‘hold’ ratings and only one ‘underperform’ recommendation, which is from Kenanga Investment Bank. The consensus target price is RM5.01, according to Bloomberg, representing a potential gain of about 7% from the current share price.  

At midday trading break, Sunway was up 1.5% to RM4.69 while Sunway Construction was nearly 3% higher at RM4.37.

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Sunway signs master agreement for RM2.6b transit-oriented project in Johor, shares rise