I seldom buy property stock. The reason being they are cyclical in nature and sometimes if you buy during the wrong cycle, the prices may take a long time to recover, if at all. Nevertheless, recently I read an interesting news about a new property developer. This is Suiwah, which owns all the Sunshine chain of supermarkets. When I first arrived in Penang 16 years ago, Sunshine supermarkets were all not up to what I would term as a good supermarket. Nevertheless, with competition from Tesco and even Jusco, it has forced Sunshine to refurbish majority of all their stores and thus these days, shopping in Sunshine supermarket is much more comfortable, brighter lighting and better layout. Even the flooring has improved tremendously. Even the leaflet looks modern!
It’s stock recently rose to a two-week high of RM2.51 early Wednesday. Reason was due to its 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 nine-acre commercial land in Air Itam, Penang. Public Invest Research was upbeat on Suiwah and said that it expects the project to provide healthy recurring rental income upon its completion. Due to Suiwah’s small market capitalisation of just RM137 million, with the project, Suiwah is valued at RM274 million or RM4.78 which is still conservative in their opinion.
However, the report did not state the actual date for the completion of the project. If the project can only complete fully in 3 years time, would you buy now? If you buy now, would you be speculating that the price would continue to go up until it reaches what Public Invest Research is targeting? Barring any unforeseen circumstances, the typical completion time for such a project would be 3 years, thus if they start this year, it would complete in 2017. The report also does not state what is the recurring income that it is expecting. I seldom buy property related stocks because of the cyclical nature as well as the many unanswered questions. However, if I wait until everything is cleared, I may think the share price is too expensive. To buy or not to buy. My decision as at now is, not to buy the stock but the SOHO to be built? That may just be a different story. We shall see.
written on 28 March 2014.
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