Investment Highlights

• We maintain our HOLD recommendation on UEM Sunrise (UEMS) with an unchanged fair value (FV) of RM0.25/share, based on a discount of 70% to our RNAV and a neutral ESG rating of 3 stars (Exhibits 6 & 7). The FV implies a FY24F PE of 13x, at parity to the average of larger cap property stocks currently.

• According to The Edge, UEMS has appointed real estate agency, CBRE|WTW to dispose part of its investment property portfolio in Kuala Lumpur and Johor, comprising of hospitality, retail assets, parking bays and district cooling systems.

• Pending clarification from management, we maintain our FV as well as earnings and gearing forecast for now.

• We observed a few advertisements on CBRE|WTW’s website, inferring that the following UEMS assets could be up for sale:

• The first asset is assumed to be its mixed development in Mont’ Kiara, the Arcoris. As at end-December 2021, Arcoris carried a net book value of RM300mil, comprising Hyatt House (4-star hotel) and a 53,000 sq ft retail component with 1,400 parking bays (Exhibits 1 and 2).

• According to the Edge, the hotel, retail component and parking bays for Arcoris are valued at RM366mil, based on prices of RM770,000 per room, RM40,000 per parking bay and RM1,500 psf for the retail space.

• In our view, the pricing assumption made for Hyatt House is on the high side. The anticipated hotel room pricing of RM770K per room is significantly higher than The Sheraton Imperial Kuala Lumpur Hotel of RM590K per room, given their comparable daily room rates (Exhibit 5). Hence, we adjust downward the value of Arcoris to RM313mil from RM366mil to reflect the lower assumption on price per room of RM590K.

• The second asset involve 1,776 parking bays in Solaris Mont’ Kiara as well as retail component and 881 parking bays in Summer Suites (Exhibits 1, 2). Based on The Edge, Summer Suites is worth RM79mil.

• We assume the price per parking bay in Solaris Mont’ Kiara to be similar as Arcoris at RM40,000. This translates into a total value of RM71mil for its 1,776 parking bays.

• The third assets are its district cooling systems in Puteri Harbour in Iskandar Puteri Johor (Exhibit 3) and Solaris Dutamas in Kuala Lumpur (Exhibit 4). These assets produce and supply chilled water for the purposes of air-conditioning to Publika and various buildings in Puteri Harbour.

• On the district cooling systems, there are no recent transactions to assess the value.

Source: AmInvest Research - 27 Mar 2023