UEM Sunrise’s (UEMS) 3QFY23 net profit dropped to RM8.3m (-60.1% YoY, -66.2% QoQ) primarily due to lower billings and land sales. Group revenue in 3Q eased by 14% QoQ due lower land sales recognized during the quarter. Revenue from land sales dropped in the current quarter to 10% of sales (versus 22% in 2QFY23) as it only recognised RM31m revenue from the sale of non-strategic land in Iskandar Puteri, Johor as opposed in 2QFY23 whereby RM69m was recognised from land sales in Tapah, Perak. Group 9MFY23 net profit lags our and consensus expectations with its YTD profit of RM48.4m only constituting 57% and 54% of respective full year estimates. As such, we adjust our earnings estimates downwards by 9%/9%/8% after reviewing our billing assumptions. Unbilled sales remain steady at RM2.7bn. Valuations are still rich in our view and hence, we maintain our Underperform call with TP unchanged at 42sen (or at about 0.35x NTA). At current prices, the stock is trading close to 50x FY24 consensus earnings.

• Sold RM1.8bn in 9MFY23, mainly lifted by build-then-sell project involving the sale of the Collingwood development in Melbourne, Australia, to Greystar Real Estate Partners which contributed AUD277.3m (or RM873.7m/49% of total pre-sales). Meanwhile, 41% of total sales came from Central, mainly from The MINH and Residensi Allevia, both located in Mont’Kiara and The Connaught One in Cheras, while sales from the Southern region, contributed around 10%, mostly from Senadi Hills, Estuari Gardens and Almas Suites, all in Iskandar Puteri. Separately, its inventories have reduced from RM203m (endFY22) to RM136m in 3QFY23.Unbilled sales remained steady at RM2.7bn which will be recognised in the next 18 to 48 months.

• RM3.4bn launched, exceeding RM2.5bn target launch 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 called Happy+ product series (a residential product series which segments its products into five categories; catering to homebuyers with varying lifestyles and lifestage needs), with The MINH under the CLUB Edition (high-end features emphasizing prestigious resort living) and The Connaught One under the RISE Series (designed as flexible and agile spaces). The higher-than-expected launches are mainly due to the Central region which saw some RM2.4bn products unveiled so far, or 72% of total launches.

Source: PublicInvest Research - 16 Nov 2023