Investment Highlights

• We maintain HOLD on UEM Sunrise (UEMS) with an unchanged fair value of RM0.43/share based on a 60% discount to its RNAV and a neutral ESG rating of 3 stars (Exhibits 2 & 3). We cut our FY21–22F numbers by 18%–17% to RM76.3mil and RM96.2mil respectively to reflect the timing of recognition while introducing FY23F net earnings forecast at RM117.5mil.

• UEMS registered net loss of RM277.3mil for FY20. Excluding the exceptional items such as impairments of investment property and inventories etc. amounting to RM95.3mil, the company reported a core net loss of RM182.0mil (vs. RM278.4mil YoY). We deem the results below our and consensus expectations.

• The weaker-than-expected results was mainly a result of the movement control order (MCO) which caused disruptions in construction progresses, hence, lower recognition. However, the negative impact was partially offset by its improved sales in 4QFY20 (67% of 2020 total sales), with new sales of RM1.1bil, exceeding its initial target of RM1bil in FY20. The main contributions came from three key projects – Residensi AVA (Kiara Bay), Residensi Solaris Parq (Dutamas) and Estuari Gardens, Johor. Meanwhile, the company’s unbilled sales stood at RM1.9bil as of FY20.

• For FY21, UEMS has set a sales and gross development value (GDV) target of RM1.2bil, solely from property developments. On top of that, the company has lined up at least 11 launches in 2021 with 74% of them in the central region. It recently launched the first phase of KAIA Heights, Seri Kembangan, comprising two blocks of condominium with selling prices from RM567K per unit (RM584 psf). The project received a booking rate of 10% in the first two weeks of its launch.

• The other development is in Taman Pertama, Cheras, scheduled to be launched in 4Q21. It offers affordable high-rise residential units with selling prices below RM500K per unit. Nevertheless, Kiara Bay remains the key highlight with the completion of connecting road (to Jalan Kepong) and F&B outlets “The Beat” (targeted to open in 3Q21) set to enhance the crowd traffic to the township and hence further boost the property sales.

• For Australian projects, particularly the Aurora Melbourne Central and Conservatory Melbourne have been fully sold with close to 100% settlement rate. The next focus is the 1.3-acre land in Collingwood with a GDV of A$250mil (~RM788mi), expected to be launched in 1H2022.

• We believe the outlook for UEMS remains stable premised on its unbilled sales of RM1.9bil while its FY21–22F earnings will be mainly supported by new launches locally and the key township development in Kiara Bay. The company’s net gearing stood at 0.4x as of 31 December 2021 (vs. 0.3x in FY19).

Source: AmInvest Research - 25 Mar 2021