Sunsuria’s New Sukuk Issuance: 3-Year and 5-Year MYR Bonds with IPG of 5.15%–5.30%

Highlights

• SST Impact: The new 6% SST on non-residential construction from 1 July 2025 may lift costs; however, BNM’s 25bps OPR cut to 2.75% has boosted housing affordability, with property loan applications up 19.2% MoM in July 2025.

• Resilient Financial Result: 3Q25 (as of June 2025) revenue declined marginally by 3% YoY to RM462 million due to project completions, but operating margin improved from 17.9% to 18.5%, supported by higher-margin projects.

• Stable Credit Profile: While debt has increased, resulting in a net gearing ratio of 33%, liquidity remains strong with an interest coverage ratio of 3.5 times.

• Recommendation:  Prefer the 3-year bond due to lower market and sector uncertainties; the 5-year bond may suit investors with higher risk tolerance.

Background

Established in 1989, Sunsuria Berhad is a dynamic publicly listed company engaged in diverse sectors, including property development, construction, landscaping, education, healthcare, property investment, retail, and other strategic ventures. Sunsuria focuses its developments within the Greater Klang Valley and Kuala Lumpur, while actively expanding its footprint into Sepang, Selangor.

Sunsuria’s SST Impact Partly Mitigated by OPR Reduction

The revised Sales and Service Tax (SST), effective 1 July 2025, imposes a 6% service tax on non-residential construction services, commercial leasing, and selected private education, healthcare, and financial services. In FY24 (as of 30 September 2024), 99.4% of Sunsuria’s revenue was derived from property development.

However, on 9 July 2025, Bank Negara Malaysia lowered the Overnight Policy Rate (OPR) by 25 basis points to 2.75% to support sustainable domestic growth amid moderate inflation and external uncertainties. The rate cut is expected to ease borrowing costs, stimulate housing demand, and support overall property market sentiment.

As shown in Chart 1, according to data released by Bank Negara Malaysia (BNM), total loan applications for the purchase of property recorded a significant increase of 19.2% MoM from RM52.5 billion to RM62.5 billion in July 2025, followed by a slight decrease of 2.7% MoM to RM60.8 billion in August 2025. On a yearly basis, total loan applications rose 6.9% YoY from RM56.9 billion to RM60.8 billion in August 2025, mainly supported by the OPR cut in July. The sustained uptrend in monthly loan applications indicates improving homebuyer sentiment and affordability, which could benefit Sunsuria’s upcoming residential launches and help sustain its sales momentum.

While the broadened SST may increase construction costs for non-residential projects, the lower financing rate environment is expected to partially offset the impact by stimulating housing demand and improving property transaction volumes.

Chart 1: Monthly Applied Loans for Purchase of Property

Robust Revenue Visibility and Development Pipeline

Sunsuria’s ongoing project in northern Sepang, located near Xiamen University Malaysia, is expected to provide steady revenue visibility supported by its strategic location and sustained housing demand. The area offers strong connectivity through major highways, including PLUS, ELITE, MEX, and SKVE, as well as ERL stations at Salak Tinggi and Putrajaya, providing convenient access to KLIA Terminals 1 and 2 and Kuala Lumpur city centre.

Source: Sunsuria Website, iFAST compilations. Data as of 17 October 2025.

In line with the Malaysia Budget 2026 initiatives, the full stamp duty exemption for first-time homebuyers purchasing properties up to RM500,000 until December 2027 and the increase in the Housing Credit Guarantee Scheme (HCGS) fund to RM20 billion are expected to enhance affordability and support financing accessibility. These measures align with Sunsuria’s affordable housing project, The Chapter, which targets the mass market with selling prices starting from RM328,000.

In FY24, the Sunsuria continued to execute its ongoing developments, including Bangsar Hill Park (Towers B and C) with a combined GDV of RM1.1 billion and The Chapter project valued at RM189 million GDV. Supported by unbilled sales of approximately RM900 million, these projects underpin Sunsuria’s earnings visibility and long-term growth potential.

Additionally, on 17 April 2025, Sunsuria acquired 9.464 acres of land for RM89 million as part of a joint venture with Kwasa Land Sdn Bhd, a wholly owned subsidiary of the Employees Provident Fund (EPF). The land will be developed into a residential project in Kwasa Damansara with an estimated GDV of RM492 million. The land cost, representing about 18% of the project’s GDV, reflects prudent capital allocation. The project’s first-phase launch, scheduled for 3Q2026 (as at June 2026), is expected to enhance Sunsuria’s medium-term earnings visibility.

Sunsuria’s Financial Performance Remains Robust

As shown in Chart 2, Sunsuria recorded a slight 3% yoy decrease in revenue, from RM476 million to RM462 million in 3Q25, mainly due to lower contributions from the property development division, as Sunsuria Forum SOHO and Sunsuria Forum Residential Suites were completed in the previous financial period.

This decline was partly offset by higher revenue from the Bangsar Hill Park project and other ongoing development projects. The current quarter also benefited from increased contributions from the education division following the opening of Concord College International School in September 2024.

Despite the slight revenue decline, the operating profit margin improved slightly from 17.9% to 18.5% in 3Q25, supported by a higher gross profit margin from the enhanced project mix and other income from non-recurring forfeiture income.

Chart 2 Revenue and operating profit margin trend

Credit Highlights

As shown in Table 1, Sunsuria’s total debt increased by 39%, from RM570 million to RM793 million, mainly due to higher drawdown of borrowings amounting to RM450 million were likely attributable to finance expenditure incurred on land held for property development of RM145 million and to inject additional funds into its associate company, Icon Sunsuria Sdn Bhd, to support the extension and refurbishment of the cancer centre at Penang Island Hospital. This was partly offset by repayment of borrowings totaling RM227 million.

The increase in borrowings slightly raised the group’s net gearing ratio to 33% and net debt/EBITDA to 3.3 times. Nevertheless, as at FY2024, Sunsuria recorded unbilled sales and GDV total of RM2.3 billion which are expected to sustain operating cash flows and keep gearing at a manageable level.

Meanwhile, the cash-to-short-term-debt ratio declined from 2.0 times to 1.5 times, primarily due to the reclassification of two sukuk maturing in October 2025 and December 2025 as short-term liabilities. These sukuk are expected to be refinanced under the existing sukuk programme. Despite the higher debt level, interest coverage remains robust at 3.5 times, indicating a healthy ability to meet interest obligations through operating earnings.

As shown in Table 2, Sunsuria’s credit metrics remain healthy compared to peers. Its net gearing of 33% is within a moderate range between Avaland’s 26% and Paramount’s 45%, reflecting prudent leverage management. Sunsuria’s net debt-to-total-property ratio of 22% is the lowest among peers, indicating manageable debt exposure relative to assets. Although its interest coverage ratio of 3.5 times is slightly below peers, Sunsuria continues to demonstrate a solid ability to meet interest obligations through operating earnings, underscoring a sound and well-managed financial position.

Table 1: Key Credit Metrix

Table 2: Peer Comparison

Overall, Sunsuria’s manageable leverage, healthy interest coverage, and solid project pipeline supported by government housing incentives underpin its strong revenue visibility and stable credit outlook over the near to medium term.

• Key risksPotential increase in inventory level: Softer housing demand and multiple ongoing projects may lead to higher unsold units, increasing holding costs and reducing cash flow efficiency.

• SST Impact:  The 6% service tax on construction services from 1 July 2025 may raise costs for commercial projects, potentially compressing margins.

• Competition and demand risks: Market oversupply, changing consumer preferences, and heightened competition from other developers may impact future sales and pricing power.

Recommendation

Sunsuria plans to tap the market again, likely in November 2025, subject to prevailing market conditions. The company aims to issue a 3-year bond with an indicative yield of 5.15% and/or a 5-year bond with an indicative yield of 5.30%, targeting an issuance size of approximately RM40 million. The bond is rated A+ by MARC with a stable outlook and will be secured by a Finance Service Reserve Account (FSRA).

We prefer the 3-year bond, as the 5-year tenure carries greater uncertainties, particularly given the housing sector’s sensitivity to market conditions and cyclical trends.

Nonetheless, the 5-year bond is not a deal breaker; Sunsuria is generally a well-managed company. Investors with higher risk tolerance may still consider participating in the 5-year issuance.

Investors should note that the final issuance yield may differ from the initial guidance, depending on prevailing market demand and pricing conditions.

Table 3: Sunsuria’s Bond

Declaration

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report holds a NIL position in the abovementioned securities.