Highlights

UEM Sunrise Berhad - Hit By Impairment Loss

Date: 29/08/2019

Source  :  PUBLIC BANK
Stock  :  UEMS       Price Target  :  1.10      |      Price Call  :  BUY
        Last Price  :  0.64      |      Upside/Downside  :  +0.46 (71.88%)
 


UEM Sunrise (UEMS) delivered 2QFY19 net profit of RM40.4m (-81.1% YoY, +34.2% QoQ), which was weaker due to impairment loss (RM37.3m) of its interest in Malaysian Bio-Xcell (MBX) which has ceased operation since May 2018. Stripping out the one-off impairment loss, the Group’s 1H2019 net profit of RM107.8m constituted 41% of our and consensus full year estimate. We deem it as in-line as we expect subsequent quarters to be stronger driven mainly by billings from its international projects especially from settlement of Conservatory and Aurora Melbourne Central in Australia. FY19 net profit is adjusted by c.-11% to reflect the impairment loss however. Maintain Outperform and TP of RM1.10, pegged at c.65% discount to RNAV. We are still of the view that property demand could take longer than expected to recover, especially those with high exposure to Iskandar Malaysia. That said, UEMS has low holding costs and could unlock the land value by outright land sale or via JVs.

  • On track to meet FY19 RM1.2bn sales target. New sales secured in 2Q were higher at RM316.8m, from RM215.2m in 1QFY19 and putting the Group is on track to meet its RM1.2bn sales target with more projects expected to be launched in 2H2019. Separately, unbilled sales dipped to RM2.6bn from RM4.1bn a quarter ago primarily due to settlement of its Australian projects and also divestment of its Mayfair project directly (which resulted in termination of sale and purchase agreements totaling RM491m but is expected to realize divestment gain immediately upon completion of the deal by end-2019).
  • More launches in 2H2019. For the remainder of the year, the Group plans to unveil some RM942m worth of projects with RM833m targeted in Q4 alone primarily from the first phase of its Kepong Metropolitan project. We understand that the Group has received consent for transfer of plot 5 of the 72.7-acre Kepong Metropolitan with development and planning currently at the final stage. The expected GDV for the first phase is RM656m. As for billings of its international projects, we understand that the momentum of settlements for its Aurora Melbourne Central and Conservatory is expected to continue into 2H2019. Elsewhere, the Group is still actively looking to sell its Seputeh land and Artisan Hills land with market value touted to be c.RM300m.

Source: PublicInvest Research - 29 Aug 2019

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