UEM Sunrise Berhad - AUD120m En-bloc Sale Terminated

Date: 17/09/2019

Source  :  PUBLIC BANK
Stock  :  UEMS       Price Target  :  1.10      |      Price Call  :  BUY
        Last Price  :  0.65      |      Upside/Downside  :  +0.45 (69.23%)

UEMS has entered into a Deed of Termination with TCL, the trustee for Ascendas Australia Hotel Trust (AAHT) to mutually terminate the existing contract to buy a service apartment block at Aurora Melbourne for AUD$120m ( or c.RM344m). The deal was signed back in 2015 and UEMS supposed to hand over the asset this year to AAHT. The deal was mutually terminated due to disagreement on specifications of certain aspects relating to the property. We understand that UEMS has received several interests from interested parties for the property, amongst which, a written expression of interest from a potential purchaser to acquire the property. We believe that the Group should not have problem disposing it en-bloc to a new buyer given the high settlement rate achieved for the completed units so far. We understand that UEMS targets to complete the disposal by end-2019. As such, earnings are kept unchanged for now. 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.

  • Aurora Melbourne Central is an 88-storey mixed-use development comprising 959 residential apartments, 252 serviced apartments, office suites and retail with a total Gross Development Value (“GDV”) of AUD750.0m ( or cRM2.15bn). The project was completed in three stages with the first separable portion (“SP”) known as SP3 completed and handed over in September 2018 followed by SP4 in May 2019. The combined settlement (full payment of purchase price and handover) rate achieved was 99% with a settlement value of AUD387.1m. The final separable portion i.e. SP5 with a GDV of AUD241.2m is expected to be handed over to the buyers in 4QCY19. The remainder of the development is the 252 units of serviced apartments located on levels 10 to 32 valued at AUD120.0m.

Source: PublicInvest Research - 17 Sept 2019

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