Investment Highlights

• We maintain our HOLD recommendation on UEM Sunrise (UEMS) with a lower fair value of RM0.38/share (from an earlier RM0.40/share), based on a 60% discount to its RNAV and a neutral ESG rating of 3 stars (Exhibits 4 & 5).

• We now project a FY21F loss of RM67mil given that UEMS’ 9MFY21 core net loss of RM61mil fell short of our earlier full-year earnings estimate of RM23mil and consensus loss of RM16mil. Delays in new launches remain the key operating risk for a turnaround in the coming quarter.

• Additionally, we trim our FY22F–23F earnings by 6%–21% to reflect a slower-than-expected recovery in construction progress and billings.

• QoQ, UEMS posted a larger loss of RM50mil in 3QFY21 (vs. RM7mil loss in 2QFY21) as intensified lockdown badly impacted domestic and overseas revenues in property development/investment and hotels.

• YoY, the group’s 9MFY21 losses narrowed to RM61mil (from RM134mil in 9MFY20), from: i) a 44% increase in progress billings; and ii) 2.4x surge in sales (Exhibit 3).

• UEMS chalked up new sales of RM915mil in 9MFY21 (vs. RM374mil in 9MFY20), attaining 76% of its unchanged FY21F sales target of RM1.2bil.

• Residensi AVA, Allevia and Serene Heights Bangi in Central region were the main contributors, accounting for 68% of total sales while the remaining 32% stemmed from the southern region.

• As at 14 November 2021, the group has secured bookings of RM250mil, with its FY21F sales target well within sight. Even so, while the higher sales and slower progress billings led to unbilled sales rising 9% QoQ to RM2.2bil, this is just 1x our FY22F revenue.

• The company would be deferring some of its planned launches of RM597mil in gross development value (GDV) including Taman Pertama Cheras (RM382mil), Serassa Greens (RM123mil) and Oasis (RM92mil) to next year due to regulatory delays.

• Hence, we believe management is likely to scale down its initial launch with a GDV target of RM1.2bil given that launches to date have reached only RM550mil. This accounted for only 46% of FY21F planned launches.

• We remain cautious on the company’s short-term outlook which could take a longer time to recover from pandemic losses. The stock currently trades at a fair FY21F P/BV of 0.3x, on par with its 2-year average.

Source: AmInvest Research - 25 Nov 2021