Investment Highlights

• We maintain our HOLD recommendation on UEM Sunrise (UEMS) with an unchanged fair value of RM0.25/share based on a 70% discount to its RNAV and a neutral ESG rating of 3 stars (Exhibits 2 & 3).

• UEMS’s indirect wholly-owned Symphony Hills entered into 3 sale and purchase agreements to dispose 17 parcels of 1,777 acres leasehold agriculture lands situated at Mukim Batang Padang and Mukim Bidor in Perak to Tapah Land Development for RM76mil cash (Exhibit 1).

• The disposal price at RM0.98 psf translates to an 11% premium to the appraised value of RM68mil by independent valuer, Khong & Jaafar.

• As at 30 September 2022, UEMS categorised the land as undeveloped landbank. As such, we have not factored in the earnings contribution of the lands into our revenue forecast. As such, we make no changes to our financial forecast.

• The consideration of RM76mil accounted for only 0.2% of its remaining gross development value. Hence, the disposal will have minimal impact to our valuation.

• Upon the completion of the disposal by end of FY23, we expect the group’s cash position will expand by 9%, subsequently leading to an improvement of net gearing ratio to 0.49x from 0.5x. Meanwhile, its total remaining undeveloped landbank will decline by 66% to 915 acres.

• Notably, 4 parcels of the land with a size of 43 acres are pending clearance and settlement of a group of indigenous people. The other parts of the lands are currently being harvested for palm oil and cash crops.

• We are positive on the group’s strategy to monetise its undeveloped lands to free up cash for future land acquisitions.

• As UEMS is currently trading at an unexciting FY23F PE of 13x near its pre-pandemic valuations, and we see limited upside potential at this juncture.

Source: AmInvest Research - 5 Dec 2022