AmWatch- UEM Sunrise : Still tough HOLD, 18 Aug 2015

STOCK FOCUS OF THE DAY

UEM Sunrise : Still tough               HOLD

We maintain HOLD on UEM Sunrise (UEMS) with a lower fair value of RM0.94/share (vs. RM1.28/share previously) on our guarded outlook on UEMS’ near-term prospects amid weaker sentiments in the local property market, particularly in Johor. Reflecting our conservative stance, we have widened the discount to its NAV/share from 45% to 60%.

UEMS reported flattish 1H15 earnings of RM137mil on the back of a 7% decline in revenue. Bottomline was partly boosted by:- (i) over RM20mil in dividends it received from one of its units that is being winded up; and (ii) LAD payments from contractors.  1H earnings accounted for only 29% of our full-year estimates (consensus: 27%). We retain our FY15F net profit forecast of RM466mil for now as there could still be lumpy strategic land sales at SILC Phase 3 and Puteri Harbour in Iskandar Malaysia that could prop its earnings.

SILC Phase 3 (197 acres) could be launched by late-3Q15, with about half of the 86 plots to be offered at a base price of ~RM80psf. Infrastructure works are due to be completed by next April (currently: >50% completed). Any delays in these strategic land sales will however exert some pressure on UEMS’ base profit target of RM500mil, in our view. New sales achieved for 2Q15 slowed to RM210mil vs. RM390mil (1H15: RM600mil vs. RM439mil in 1H14). On a more positive note, response to its new launches in 1H15 – Sefina @ Mont Kiara (RM307mil) and Serene Heights, Bangi (RM181mil) – has been rather encouraging. Both projects achieved booking rates of ~50%, with the former being offered at ~RM850psf. 

Moving into 2H15, Estuary@Puteri Harbour was launched a fortnight ago and achieved overall bookings of ~40%. In Australia, Conservatory – UEM’s second project in Melbourne (GDV: A$274mil) – will be unveiled soon. The allocation to Chinese investors (~25%) has been fully taken up. We believe the real litmus test for UEMS is the conversion of these commendable bookings into actual sales, especially those within the local market. 

QUICK TAKE

Berjaya Sports Toto : Philippines gaming concession extended   HOLD

NEWS HIGHLIGHTS

Property Sector : Bertam seals RM46m Sabah land deal

Property Sector : UEM Edgenta buys CSL for RM26 million

DISCLAIMER:

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.