- We initiate coverage on UEM Land, with a BUY and a fair value of RM3.60/share, pegged at a 15% discount to its NAV estimate of RM4.24/share.

- UEM Land is the most liquid proxy to the ascendancy of the Iskandar Malaysia (IM) region, where FDI flows, firstclass infrastructure, enhanced connectivity with Singapore and inward migration would continue to reflate land values and by extension, NAV growth.

- Secondly, UEM Land’s share price may get a significant kick from the imminent listing of Iskandar Waterfront Holdings. The latter may prod a narrowing in the current NAV discount of 34% that the stock is trading at via an accelerated share price discovery to its fair value.

- Based on UEM Land’s current market capitalisation of RM12bil, the implied land value is very attractive at just RM24 psf – whereby ~62% of the group’s available landbank is located in Nusajaya.

- This is much lower the recent sale of land at RM211 psf to Liberty Bridge at Puteri Harbour and a new benchmark of RM376 psf for prime seafront land acquired by China’s Country over at Danga Bay.

- Thirdly, UEM Land is no longer just an NAV play. Earnings delivery is already underway vs. solid FY13F-15F earnings CAGR of 12%; rising from RM447mil in FY12 to RM627mil in FY15F. Management is guiding for higher FY13F new sales of RM3bil (+22% YoY), on unbilled sales of c.RM2.2bil (~1.3x FY12 property development revenue).

- Going forward, UEM Land is bent on developing its own landbank as opposed to land sales – as can be seen from the rising weight of property development sales relative to group revenue (from 17% in FY 08 to 81% in FY12).

- Gerbang Nusajaya (4,500 acres) is central to its new launch pipeline. Three prolific deals have been secured since its launch towards end-2012 – the most notable being the RM3.7bil GDV tie-up with Ascendas to develop an industrial park. Phase 1 is be delivered by 2017.

- This landmark deal would help accelerate the development cycle at Gerbang (where demand from Singapore SMIs is fast-rising) and by extension, a convergence with prices of primary industrial land within JB city.

- UEM Land’s net gearing is set to improve to 7% (FY12: 20%), with c.RM400mil in land sale proceeds from Puteri Harbour due to flow in this year. Maiden DPS declared in FY12 (implied gross yield of 2%) is a good start.

Source: AmeSecurities