Investment Highlights

• We reaffirm our BUY recommendation on UEM Sunrise (UEMS) with a revised fair value of RM0.96 (previously RM1.00) based on a 45% discount to its RNAV (Exhibit 2). We cut our FY19–FY20 earnings forecasts by 7% and 1.5% respectively to reflect the timing of revenue recognition. We also introduced our FY21 net profit forecast at RM229.9mil.

• UEMS’ FY18 core net profit of RM241.5mil came in below expectation at 93% and 90% of our and consensus estimates respectively. FY18 core net profit jumped by 243.4% mainly driven by the completion and partial settlement of Conservatory and Aurora Melbourne Central and nonstrategic asset divestment.

• For the Australian projects, 207 units of the first separable portion of Aurora Melbourne Central, SP3 (GDV A$115.2mil) and 421 units of Conservatory (GDV A$298.5mil) have been completed with settlement rates of 97% and 68% respectively.

• UEMS chalked up new sales of RM1.4bil in FY18, exceeding its initial target by 19%. More than 50% of the total property sales were derived from the central region developments at Mont’Kiara, namely Residensi Solaris Parq, Kondominium Kiara Kasih and the recently launched Residensi Astrea. Meanwhile, 32% were mainly contributed by the southern region at Iskandar Puteri, namely Serimbun, Estuari Gardens in Puteri Harbour and the 68° Avenue. The remaining 14% were from projects in Melbourne, particularly Mayfair. The unbilled sales of RM4.4bil will be progressively recognized over FY19–21.

• UEMS launched 5 projects worth over RM900mil in FY18, namely Residensi Astrea @ Mont Kiara (from RM1.2mil, GDV RM323.0mil, take-up rate 52%); Kondominium Kiara Kasih @ Segambut (RM300K, GDV RM215.7mil, take-up rate 97%); Serimbun @ Iskandar Puteri (RM630K-RM1.4mil, GDV RM139mil, take-up rate 78%); Eugenia @ Serene Heights Bangi (from RM659K, GDV RM62.5mil, take-up rate 55%); and 68° Avenue (from RM955K, GDV RM167.7mil, take-up rate 61%).

• For 2019, UEMS is targeting new sales of RM1.2bil, focusing on the mid-market and reasonably sized pocket launches in matured locations namely Aspira Park Homes @ Gerbang Nusajaya, Johor (landed residential – GDV RM186mil); Serimbun 2 Phase 1 @ Iskandar Puteri, Johor (landed residential – GDV RM122mil); new phases of Serene Heights @ Bangi, Selangor (landed residential – GDV RM192mil); and a new development in Kepong, KL (high-rise residential – GDV RM640mil).

Source: AmInvest Research - 27 Feb 2019