KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) is positive about Sunway Bhd’s property arm Sunway Property acquiring 99.15 hectares of freehold industrial land in Kuang, Rawang for RM115 million.

The investment bank stated this is due to the strategic location of the land, with good connectivity to KLIA and Port Klang, as well as the fair acquisition price.

It also added that the attractiveness of the industrial segment benefits from the strong foreign direct investment (FDI) flow trend, and the venture allows the group to diversify its revenue stream.

“The group previously had experience in building small parcels of industrial lots, including in Subang and Dengkil.  “However, this venture is the group’s first foray into a large scale and full-fledged industrial park.

“The industrial segment remains attractive given the strong FDI flows to Malaysia, noting that in 2022, Malaysia recorded its highest net FDI amounting to RM73.3 billion,” it said in a note today.

HLIB Research noted that as a geopolitically neutral country, Malaysia should continue to benefit from the de-globalisation trend as manufacturers reshore and recalibrate their supply chains due to the ongoing US-China trade friction and Russia-Ukraine war.

It said other than that, by venturing into the industrial segment, the group will also be able to diversify its revenue stream and mitigate risk in the event of a slowdown in residential segment.

“Finally, as explained above, the land location is strategic while acquisition price is fair.

Thus, we are overall positive on the acquisition,” it added.

Meanwhile, HLIB Research also said post-acquisition of this industrial land as well as the recent Sri Hartamas land acquisition announced in May, the group’s net gearing will increase to 63.8 per cent from 61.6 per cent in the first quarter of 2023 (1Q23).

It added that the group’s remaining landbank will increase to 1338.7 hectares from 1239.6 hectares as at June 30, while its effective remaining gross development value (GDV) will increase to RM37.3 billion.

HLIB Research has maintained a “Buy” call on Sunway Bhd, with an unchanged target price of RM2.65 based on sum of part (SOP)-derived valuation.

The investment bank noted that Sunway remains its top pick due to its synergistic business model, allowing each of its individual business segments to integrate and tap into its vast business ecosystem, providing them with a platform to thrive and grow beyond their current capacities.

Sunway’s land acquisition is through Sunway Rawang City Bhd, which is a joint venture between Sunway (70 per cent) and Amal Resources (30 per cent).

The transaction is expected to be completed by 1Q24.

The proposed development for the land is an industrial technology park comprising factories, warehouses and commercial components.

The development has an indicative GDV of over RM2 billion with target launch in early-2026, to be developed over an estimated period of 10 years.