- We maintain our BUY call on UEM Sunrise (UEMS) with an unchanged fair value of RM2.78/share. This pegs the stock at a 30% discount to its sum-of-parts (SOP) value.

- UEMS delivered a 1Q14 net profit of RM61mil on the back of RM401mil in revenue.

- This accounted for only ~10% of our full-year estimates (consensus: 12%). But, we expect earnings momentum to pick up in the remaining quarters of 2014. Some land deals may also crystallise this year.

- 1Q revenue fell by 42% YoY largely in the absence of any land sale gains. For 1Q13, UEMS recorded RM400mil in land sales (~RM135 profit) from the disposal of land in Puteri Harbour to Liberty Bridge Sdn Bhd.

- Key profit contributors during the period were East Ledang, Nusa Idaman and Teega. Key launches during the period include Almas at Puteri Harbour (GDV: ~RM258mil).

- Excluding land sales, we estimate 1Q earnings to be 19% lower YoY. Encouragingly, property development revenue rose by 39% YoY.

- Sequentially, 1Q earnings jumped by ~2.1x mainly due to a review of the group’s overall project estimates in 4Q13.

- New sales achieved for 1Q14 was RM123mil against an unbilled sales of ~RM3.2bil as at 31 March 2014.

- UEMS has lined up several new projects for FY14F that will help underpin its new sales target of ~RM3.2bil for FY14F (FY13: RM3bil).

- Key projects to debut include the D’Estuary (Nusajaya), Sinaran Hills (Kajang), and Serene Heights (Bangi). We expect the latter two to be reasonably well-received, particularly for its landed products.

- Meanwhile, the group’s collaborations with KLK Land Sdn Bhd and Motorsports City in Iskandar Malaysia are set to be consummated by the end of this year.

- We expect UEMS’ share price to have priced in any slowdown in the Iskandar Malaysia property market.

- Balance sheet remains healthy with a net gearing of 0.15x as at 31 Dec 2014, and a cash balance of RM1.1bil. 

Source: AmeSecurities