- We maintain our BUY rating on UEM Sunrise with an unchanged fair value of RM2.34/share (40% discount to NAV). UEM Sunrise’s 9M14 net profit (3Q14: RM71mil, -4% QoQ) was 59% lower YoY at RM207mil. But earnings, exland sales, were a tad higher at RM181mil (+2% YoY). We maintain our FY14F net profit forecast at RM513mil as we expect the group to crystallise new land sales to KLK and Motorsports City totaling RM689mil in 4Q.

- 9M13 figures were boosted by land sales totalling RM709mil to Liberty Bridge and Southern Marina (net gain: RM323mil). A year ago, 9M14 land sales and net gain (to Horizon Hills) were only RM58mil and RM26mil respectively.

- During the same period, revenue from property development rose 12% YoY. Key profit contributors were East Ledang, Quintet, and Nusa Idaman.

- While new sales fell further to RM202mil in 3Q14 (-36% QoQ), we expect a marked pick-up in 4Q on conversion of the bulk of bookings from its maiden Melbourne project –the Aurora Melbourne Central by year-end. This should underpin the group’s FY14F sales target of RM2bil (9M14: RM641mil). Unbilled sales stood at RM4bil.

- UEM has got off to a fast start in Australia. Aurora offers a total of 941 apartments, 208 serviced apartments, retail units and car parks. It attracted a mixed pool of buyers comprising Australians (25%), Malaysians (22%), Singaporeans (15%) and Hong Kong/Chinese (38%).

- Aurora’s central location in La Trobe Street and connectivity to the prime Melbourne Central shopping centre were the main reasons for the sellout; Phase 1 (only residential units: GDV:A$570mil) saw 95% of total units booked within two weeks. The units were priced at ~A$10k/sq m (A$930psf).

- The next phase will likely be launched by mid-2015 and within the same price bracket. Indicative project margins are c.20%-25%. Likewise, the industrial park JV with Ascendas had achieved bookings for nine out of the 20 lots of land (ready-built: ~RM380psf). The current outlook in Johor nevertheless remains challenging given the recent changes in legislation.

- Pre-sales had picked up with three prolific launches in October alone totalling RM2.6bil (9M14: ~RM3bil). More importantly, the sales momentum should continue in FY14F with RM4bil worth of new launches in the pipeline. New launches in 1Q14 include Serene Heights (RM120mil), D’Estuary (RM470mil), Denai (RM180mil), and Sephina (RM300mil).

Source: AmeSecurities