Investment Highlights

• We maintain our HOLD call on UEM Sunrise (UEMS) with an unchanged fair value of RM1.25 based on a 60% discount to its RNAV. We make no changes to our FY17F- 19F earnings forecasts.

• UEMS’ 1HFY17 net earnings soared 170.2% YoY to RM155.8mil. This made up 70% of our full-year forecasts and 66% of consensus. We deem this to be in line, as we expect a weaker performance in the upcoming quarters. No dividend was declared, as expected.

• The positive performance was contributed by an improvement in the property development segment and higher land sales. Property development revenue increased 50% YoY in 1HFY17 to RM968.1mil, mainly due to revenue contribution from Residensi 22, Mont Kiara development, the completion of its Teega, Puteri Harbour project, as well as its Melbourne projects, namely Aurora and Conservatory.

• UEMS also registered a 333% YoY jump to RM418.2mil in revenue from land sales in 1HFY17. This was mainly due to its disposal of Alderbridge land in Canada (4.9 acres) for C$113mil (RM371mil) in 2QFY17.

• New property sales dropped 8.3% YoY to RM391.7mil in 1HFY17. This was mainly attributed to the lower sales in its international projects, which fell 49% YoY to RM88.5mil. However, property sales for its domestic projects registered growth, with new sales in Johor expanding 78% YoY to RM66.6mil, contributed mainly by its Estuari, Puteri Harbour project (RM51.7mil in new sales). UEMS’ new sales for the Klang Valley also registered strong growth, climbing 19% YoY to RM124.2mil, contributed mainly by its Symphony Hills development in Cyberjaya, which chalked up RM37.5mil in new sales in 1HFY17.

• UEMS’ earnings transparency remains positive with a healthy RM4.7bil unbilled sales at end-1HFY17 (end- 1QFY17: RM5.0bil).

• Management reiterates its new property sales target of RM1.2bil for FY17, underpinned by RM1.7bil of new launches slated for FY17. We believe the sales target is still achievable, given that most of the launches will take place in 2H17. The group launched its Dahlia@Serene Heights Bangi (GDV: RM58.5mil) in mid-July 2017. It is also launching Solaris Parq Residences, Dutamas (GDV: RM370.5mil), Serimbun, Bukit Indah (GDV: RM142.1mil) and Mayfair, St. Kilda, Melbourne (GDV: RM1.1bil), its third project in Australia this year.

Source: AmInvest Research - 24 Aug 2017