KUALA LUMPUR (May 12): Shares of Sunway Bhd rose in early trade today after Hong Leong IB Research upgraded the stock 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.

At 9.20am, Sunway (Fundamental: 1.50; Valuation: 1.80) rose 1.18% or 4 sen to RM3.44 with 16,000 shares traded.

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.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for details on a company’s financial dashboard.)