UEM Sunrise Bhd
(Oct 16, RM1.65)
Maintain hold with target price (TP) of RM1.87: While UEM Sunrise remains long-term positive on Iskandar Malaysia (given its strategic location near Singapore and improving infrastructure and connectivity), it has turned cautious on the short-term property market outlook there due to increasing competition from foreign developers. It intends to reduce its dependency on Nusajaya projects via a land swap/land purchases and more property launches outside of Nusajaya.
UEM Sunrise is confident on achieving its new RM2 billion sales target for FY14 supported by an estimated RM2.2 billion of new launches in 4Q14. Surprises could come from potential land sales in Canada and Puteri Harbour.
We are long-term positive on UEM’s plan to reduce its heavy exposure (71% of remaining gross development value) in the increasingly crowded Iskandar Malaysia hotspots. Nevertheless, it may take a while as significant earnings contributions from its new non-Nusajaya projects (e.g. Melbourne project) may only come in from 2016-2017, we estimate.
We maintain our earnings forecasts but lower our Revised Net Asset Value (RNAV) estimates by 7% to RM3.83 (from RM4.13) to reflect lower land price assumptions (-10% to -13%). Our UEM Sunrise TP is pegged at 0.49 times price to realisable net asset value (P/RNAV), which was previously 0.51 times, based on unchanged -0.1 times below its historical five-year mean. — Maybank IB Research, Oct 16
This article first appeared in The Edge Financial Daily, on October 17, 2014.