Investment Highlights

• We maintain 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 2 & 3).

• Pending the company’s FY21F results next month, we maintain our earnings forecast despite the company exceeding its 2021F sales target of RM1.2bil by 22% to RM1.5bil (+30% YoY).

• We believe our FY21F earnings remain intact as 4QFY21 results are unlikely to turn around due to the pandemicinduced construction delays. However, we expect 4QFY21 losses to narrow by 80%-90% QoQ supported by a pick-up in progress billing progress and recovery in construction activities.

• Developments in the central region achieved 71% of 2021 total new sales with Residensi Ava in Kiara Bay at 30% and Residensi Allevia in Mont Kiara 15%. Both projects chalked up RM654mil- 45% of 2021 sales. Southern region made up the remaining 29% with the main contribution from Senadi Hills (Phase 1), which secured new sales of RM110mil (7%).

• This year, UEMS plans to launch projects worth RM3.3bil (vs. 2021 initial launch target of RM1.2bil). The majority of new launches are expected from the central region (56%), international projects (26%) and southern region (18%). International projects include launching a 1.3 acre mixed development in Collingwood, Melbourne which was acquired in 2020 and carries a GDV of AUD250mil.

• The company also set a slightly higher FY22F sales target of RM1.5bil (+3% YoY). We believe that this is achievable given the encouraging 4Q21 sales recovery momentum, which surged 1.6x from 3Q21 following the easing of movement restrictions.

• With its aggressive pipeline of launches in 2H2022 together with robust marketing campaigns, we expect the group’s improving sales momentum to remain intact. Nevertheless, the group’s unbilled sales of RM2.34bil as at 31 December 2021 (+6% QoQ, +23% YoY) translates to a low 1.1x FY22F revenue projection.

• As the company could take a longer time to recover from pandemic losses as compared to its peers, UEMS’ FY22F P/E of 22x is currently near its FY18-FY19 average before the pandemic-driven losses in FY20-FY21.

Source: AmInvest Research - 31 Jan 2022