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We visited Suiwah Corporation (Suiwah) and met its managing director, Dato Hwang and property division manager, Ms Voong. We spent an hour discussing on Suiwah‟s upcoming Sunshine Tower project (mixed development comprising a retail podium, a hotel, a SOHO block and a serviced apartment block) which will be built on a 9-acre commercial land in Air Itam, Penang Island. After the briefing, we are more optimistic on the feasibility of Sunshine Tower and expect the project to provide healthy recurring rental income upon completion. We believe the project will be a significant game-changer for Suiwah which has only a market capitalisation of RM137m. Based on our sum-of-parts (SOP) valuation, we value Suiwah at RM274m or RM4.78/share which is on the conservative side, in our opinion. In our valuation, we have only included land value instead of development value of the Sunshine Tower project.

Details on Sunshine Tower project. Sunshine Tower will be built on a 9-acre commercial land (plot ratio of 5) in Air Itam, Penang Island, comprising a 9-storey retail podium (estimated NLA of 900,000 sq ft), a 320-room hotel, a 144-units SOHO block and a 270-unit serviced apartment block. The retail podium includes a basement floor & a wellness centre and will be anchored by Sunshine Farlim supermarket/ departmental store. The three towers (hotel, SOHO and serviced apartment) will be built on top of the retail podium. According to management, the project has already received all necessary approvals and construction is expected to commence soon.


Feasibility and financing of the project. Dato Hwang mentioned on feasibility and criteria for building a successful mall: (i) good location (Sunshine Tower is located in high-density residential area with an estimated catchment population >200,000 within 5km range); (ii) easy access (the project will have two flyovers going directly into the mall from Jln Thean Teik and multiple exits); (iii) ample car parking space (Sunshine Tower will have 3,500 parking bays); (iv) good tenant mix and anchor tenant (Sunshine Farlim will be anchor tenant and retail units are retained for optimal mix including F&B outlets and multi-hall cineplex). We believe Suiwah‟s more than fifty years of retail experience in the Air Hitam area will be its key competitive advantage for successful implementation of project. We were originally concerned on the ability of Suiwah to finance a project of such magnitude (development cost is estimated to cost around RM550m) but with a projected RM300m sale proceeds from SOHOs and serviced apartments will help to support financing over 3-4 years of construction. Management indicated that banks have been supportive of the project and will face minimal problem financing it.

Healthy balance sheet and operating cash flow. Suiwah has a net cash position of RM33.4m (including short-term liquid investments) as at its latest quarter reporting date. In addition, the group generated positive net operating cash flow of around RM25m-RM40m per annum in the past three years.






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