UEM Sunrise (UEMS) announced that it has acquired its first residential development site in Subiaco East in Perth, Western Australia for AUD$22.2m (or about RM66.8m). This deal marks the Group’s maiden foray into Western Australia as its previous projects were mainly located in Melbourne. The land, which is purchased from DevelopmentWA, is earmarked for two landmark apartment buildings, though no details have been given on the potential gross development value (GDV) as yet. As such, we keep our earnings estimates unchanged for now. The stock price has surpassed our earlier estimates on the news of a revival in the High Speed Rail project. Given the re-rating, we adjust our TP from 33sen to 42sen (narrowing the valuation discount to about 0.65x NTA). At current prices, the stock is trading close to 30x FY24 consensus earnings. We believe Johor, which has the largest number of overhang residential properties, could need more time to absorb the existing supply before demand can pick up. All told, we downgrade our call on UEMS from Neutral to Underperform.

• Land details. The Group purchased Lots 1 and 2 (with combined land size measuring about 1.22 acres) of The Oval precincts at Subiaco East from DevelopmentWA as part of the state’s most significant urban redevelopment projects at the iconic former Subiaco Oval, which is located 2km from Perth CBD. We understand that Subiaco is a verdant suburb known for its eclectic architecture, quaint, leafy residential streets, premier shopping, and multicultural dining scene. UEMS plans to develop a mixed-use residential precinct which will comprise of two towers with approximately 430 apartments across Lot 1 and Lot 2, subject to development approval. The project will include up to 12% affordable housing as well. The Group indicated that construction is expected to commence in 2026 but no details on the potential GDV have been disclosed.
  
  This will be UEMS’ second active project in Australia. To recap, it announced back in June that it partnered with Greystar Real Estate Partners to develop the first "build-to-rent" (BTR) project in the innerMelbourne suburb of Collingwood. The transaction value was approximately AUD$277.3m which will include approximately 400 apartment units across two buildings.

Source: PublicInvest Research - 16 Aug 2023