UEM Sunrise’s (UEMS) 2QFY23 net profit of RM24.7m (+19.3% YoY, +60.9% QoQ) came in within estimates. Group 1HFY23 net profit of RM40.1m (0.8% YoY) is at about 50% of our and consensus full-year estimates. Unbilled sales are also stronger, mainly lifted by the sale of the Collingwood development in Melbourne, Australia, to Greystar Real Estate Partners for AUD277.3m (or RM873.7m in total) which bumped its presales to close to RM1.5bn, already meeting its FY23 sales target (to be revised upwards). As of 30 June 2023, UEMS has unbilled sales of RM2.7bn. All told, we maintain earnings estimates and our Underperform call with TP unchanged at 42sen (or at about 0.35x 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.

• 1HFY32 presales lifted by Aussie project. Group pre-sales clinched in 1HFY23 were RM1.5bn (which has already met its FY23 sales target). 32% is from the Central region, mainly from The MINH in Mont’Kiara, The Connaught One in Cheras, and Residensi Allevia, while 9% was from the South, mostly from Senadi Hills, Estuari Gardens and Aspira Square, all in Iskandar Puteri. The build-then-sell project involving the sale of the Collingwood development in Melbourne, Australia, to Greystar Real Estate Partners contributed AUD277.3m (or RM873.7m). Correspondingly, its unbilled sales also jumped to RM2.7bn.

• RM2.5bn worth of project launches in FY23. To recap, the Group lined up launches worth RM2.5bn in FY23. YTD, the Group has unveiled The MINH (MR979m GDV), Mont Kiara in May and its first transit-oriented development, The Connaught One (RM743m GDV) in June. Both developments are also the first of their kind in the Group’s marketing campaign caled Happy+ product series (a residential product series which segments its products into five categories; catering to homebuyers with varying lifestyles and life-stage needs), with The MINH under the CLUB Edition (high-end features emphasising prestigious resort living) and The Connaught One under the RISE Series (designed as flexible and agile spaces). Meanwhile, it launched Phase 2A of its freehold neighbourhood of Senadi Hills in August and looking to launch new phases of its existing developments, mainly double-storey landed homes in Serene Heights, Semenyih as well as further phases in Senadi Hills and Gerbang Nusajaya, both in Iskandar Puteri

Source: PublicInvest Research - 21 Aug 2023