Investment Highlights

• We maintain our HOLD recommendation on UEM Sunrise (UEMS) with an unchanged fair value of RM0.38/share based on a 60% discount to its RNAV and a neutral ESG rating of 3 stars (Exhibits 5 & 6).

• We maintain our forecasts and sales take-up assumptions on the development of KAIA Heights hilltop condominium following the investors’ preview yesterday at KAIA Heights Sales Gallery in Equine Park, Seri Kembangan, Selangor.

• Based on our site visit, this development is surrounded by a mature neighbourhood where commercial shop lots offering food and beverages services (F&B) are located 1km away from the high-rise residence. Amenities nearby include educational institutions, AEON Mall Taman Equine and MRT stations (Exhibit 2).

• The selling price of KAIA Heights leasehold high-rise residential units ranges from RM567,800 to RM873,800 for 5 different layouts (unit size ranges 972 sqft–1,437 sqft). We gather that the product is priced higher by up to 25% psf as compared to the nearest high-rise residential developments such as One Equine, Taman Equine.

• However, we think the pricing is reasonable given that the project provides a wide range of facilities, including futsal and basketball courts as well as a jogging trail, in which 42% of the development area is dedicated to greenery and facilities (Exhibit 4).

• The group targets mainly the home-occupier segment such as the extended family. Since its first launch in March 2021 amid Covid-19 movement restrictions, KAIA Heights has achieved a decent take-up rate of 50% for both Towers A and B while Towers C and D are expected to be launched by end–2022. We think the momentum is likely to pick up further following the official launch of KAIA Heights sales gallery together with the easing of movement restrictions.

• We are comfortable with the product design and layout which assure low density with 10 units per floor at Towers A and B, of which 60% are corner units (Exhibit 3). The development has total 517 units for both towers.

• As restriction-led foreign workers’ shortage has slightly affected construction progress, where the completion rate of the development stands at only 11% currently. The project is expected to be completed in 1Q25.

• Hence, we remain cautious on the company’s short-term outlook which could take a longer time to recover from pandemic losses. As UEMS is trading at a pricey FY22F PE of 23x currently, we think the upside is limited.

Source: AmInvest Research - 20 Jan 2022