Investment Highlights

• We maintain our BUY recommendation on UEM Sunrise (UEMS) with an unchanged fair value of RM0.80 based on a discount of 45% to its RNAV (Exhibit 2). We make no changes to our FY19–21 net earnings forecasts.

• Yesterday, UEMS officially unveiled its latest high-rise township project in Kepong, namely Kiara Bay. Touted as the next Mont Kiara, Kiara Bay is a 73-acre integrated township next to the KL Metropolitan Park, to be built via a 50:50 JV with Mega Legacy Equity SB. The JV plans to develop a mixed residential and commercial development with an estimated GDV of RM15bil over a 15-year period.

• The first phase of Kiara Bay will be a leasehold high-rise residential tower comprising 870 condominium units with built-ups ranging from 800 sq ft to 1,250 sq ft. The selling price ranges from RM500K to RM900K, with an estimated GDV of RM656mil, mainly targeted at the second generation of Kepong folk who are open to high-rise living and prefer to stay in the area, one of the most established towns in Kuala Lumpur. Kiara Bay phase 1 comes with a wide array of facilities such as swimming pools, gym, sky deck, etc.

• Kiara Bay will be the key highlight for FY20 and beyond for UEMS. We expect the project to be well-received given its strategic location along the MRR2 (within 5km from DUKE, NKVE and LDP) and a growing young population in that area. On top of that, there are two new interchanges that will provide direct access from the MRR2 to Kiara Bay. Additionally, there will be two MRT2 stations nearby – Kepong Baru and Jinjang – which are scheduled to be operational by 2021.

• We are confident the government’s proposal to lower the threshold on high-rise property prices in urban areas for foreign ownership to RM600K from RM1mil in Budget 2020 will be beneficial for UEMS as it will improve the demand of high-rise residential properties, especially in Klang Valley.

• We believe the outlook for UEMS to remain stable premised on its local unbilled sales of RM947mil while its FY19–20 earnings will be mainly supported by the Australian projects which are due for completion in 2H19. The handing over of the Australian projects will also reduce the company’s net gearing from 54% to 40% by the end of FY19 and below 40% in the following year. Maintain BUY.

Source: AmInvest Research - 25 Oct 2019