Recently it was reported that Sunway via 70 %-%-owned Umech Land Sdn Bhd entered into an agreement with PDC to develop 559 acres of land in Batu Kawan, Penang into an industrial park.
PDC, being the owner of the land, will provide the land, while Umech as the developer will independently fund and manage the industrial park development. In return, Sunway and Umech are providing PDC with a land entitlement of RM646m. This will be done via deferred payment over four years through internally generated funds and debt, although the exact proportion is unknown at this juncture. The project is expected to have a GDV of RM3.5b with an 8-year development period, with an expected launch in early 2025.
Kenanga investment is positive on the latest development as it expands the group’s presence in the growing industrial development in Penang. Additionally, the project is strategically located around 4km from the Second Penang Bridge and close to existing industrial parks such as Bandar Cassia Technology Park, Valdor Industrial Park, and Batu Kawan Industrial Park 1 (BKIP 1).
The price tag of RM646m translating to about RM27 per sq ft is lower than the asking price of RM35 per sq ft for large land tracts in the area. In addition, it will be paid in installments over four years (which means the NPV of the price tag is even lower). Analysts at Kenanga believe Sunway is getting a good deal here.
The house maintains outperform as the launch is only likely to take place in FY25 which is beyond its forecast period.
