KUALA LUMPUR (May 12): Hong Leong IB Research has upgraded Sunway Bhd to “Buy” (from Hold) at RM3.40 with an unchanged target price of RM3.75 after Sunway acquired 740,342 sf of land in Petaling Jaya for RM286 million.

In a note today, the research house said it was positively surprised by the proposed acquisitions, although they were in tandem with the group’s objective to replenish its landbank.

HLIB Research said Sunway was proposing a mixed development comprising 7 residential blocks with a commercial podium, with estimated gross development value of RM1.8 billion.

“With the average price/sf of RM386.31, we believe the acquisition price is fair as transactions done surrounding the acquired lands are priced between RM300-500 psf.

“Based on its latest balance sheet figures, the acquisition would increase Sunway’s net gearing marginally by 0.30x to 0.35x.

“Target price remained unchanged at RM3.75 based on SOP valuations. Given that target price have now provided more than 10% upside from share price, we now upgrade the stock from Hold to Buy,” it said.