In a note today, the research house has maintained its “neutral” call on Sunway, albeit with a revised target price of RM1.84 from RM1.88 previously, reflecting the group’s limited upside potential.

Umech Land Sdn Bhd, Sunway’s 70%-owned subsidiary, received a termination notice yesterday relating to its joint development agreement with Penang Development Corporation (PDC), dated Oct 20.

PDC is the state development arm which has been entrusted to promote industrial, commercial, residential or other developments in Penang.

As a result of this termination, PDC is set to expediently refund Umech Land’s substantial 10% deposit of RM64.6 million within 30 days from the termination date.

Thus, MIDF Research expects limited financial implications to Sunway following the termination of the land deal with PDC. Instead, it feels confident that Sunway can recoup its investment in the land transaction.

“Note that Sunway incurred a total of RM45 million for the 70% stake in Umech Land and the proportionate initial performance deposit,” it said.

“Meanwhile, we make no changes to our earnings forecast as we had not factored in contribution from the land deal into our earnings projection,” it added.

MIDF Research remarked that Sunway’s prospects appear steady as it is likely to benefit from new property sales generated by its Singapore ventures and an improved outlook for Sunway Iskandar, thanks to positive developments in the Johor real estate sector.

As at 12.29pm, Sunway’s share price was unchanged at RM1.88, valuing the group at RM9.41 billion.