Investment Highlights

• We maintain our HOLD recommendation on UEM Sunrise (UEMS) with an unchanged fair value of RM0.80 based on a discount of 45% to its RNAV (Exhibit 1). We make no changes to our FY19–21 net earnings forecasts.

• UEM Sunrise entered into a contract of sale with Scape Australia Management Pty Ltd for the disposal of 252 units of a serviced apartment (Aurora Tower) forming part of Aurora Melbourne Central together with 10 car park lots and part of the ground floor retail area measuring a gross floor area of 14,900 square meters for A$125.0mil or RM354.6mil cash.

• In September 2019, UEMS and A-HTrust mutually terminated the contract of selling the 252 units of the serviced apartment (Ascendas bloc) within its Aurora Melbourne Central to AHTrust at A$120mil following the disagreement on specifications of certain aspects relating to the property. The mutual termination allowed UEMS to seek and explore other opportunities that are more beneficial to the group.

• The deal is expected to be completed in 2QFY20. UEMS is expected to recognise a gross revenue of A$125.0mil (RM354.6mil) and net disposal gain of A$18.3mil (RM51.9mil). UEMS has yet to determine the allocation of the utilisation of proceeds as well as its timeline as it is still exploring various opportunities. We made no changes to our numbers as these have been imputed into our forecasts earlier.

• We believe the outlook for UEMS remains 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 HOLD.

Source: AmInvest Research - 25 Nov 2019