UEM Land; Hold; RM2.20
Fair Value: RM2.30; ULHB MK

UEM Land announced that it has entered into a conditional sale and purchase agreement for 122.28 acres of land with Tanjung Bidara Ventures Sdn Bhd (wholly-owned subsidiary of Khazanah Nasional) for RM93.2m, translating into RM17.50psf.

The land is a vacant parcel of freehold land under agricultural classification at the moment. It is adjacent to Kota Iskandar (Johor government administrative center) and is ~40km to the south-west of Johor Bahru  City Centre. UEM Land plans to develop the land into a premier residential enclave featuring a mix of canal-front homes with individual berthing and high-end condominiums. The project is expected to span over 7 years and commence in 2013.

We believe that the relatively low transaction price of RM17.50 is due to the agricultural land status. Comparing to recent land transactions around Johor Bahru, the acquisition price is at the lower end of the range. The strategic location of the land will complement UEM Land's master development plan for  Nusajaya as well. It is envisaged to form part of Puteri Harbour which will offer luxurious waterfront living lifestyle.

The latest transacted price of Puteri Harbour has reached RM220psf, suggesting vast potential for the proposed land acquisition.

We maintain our Hold rating and RM2.30 TP based on a 40% discount to RNAV of RM3.82. Potential rerating catalysts include warming bilateral ties and robust private investments from Singapore.

Source: HwangDBS Research - 10 April 2012