• FY23 core net profit of RM64.8m was 20% below our forecast, on higher - than-expected tax rate. It declared 0.75 sen dividend (50% payout ratio).

• UEMS achieved property sales of RM2.1bn in FY23 driven by international segment. It guided for a RM1.0bn sales target in FY24F.

• Reiterate Reduce on UEMS, with a TP of RM0.75 (0.55x FY24F P/BV).

FY23 core earnings down 12% yoy

• In 4QFY23, UEM Sunrise (UEMS) reported core net profit (excluding impairments and allowance for doubtful debts) of RM27.5m, taking FY23F core net profit to RM64.8m (- 12% yoy). This came in 20% below our expectations (due to higher-than-expected tax rate of 38% vs. our estimate of 24%) and 26% below Bloomberg consensus.

• FY23 revenue fell 9% yoy on lower contribution from property development. However, EBITDA margin improved by 3% pts to 21%, mainly due to higher margin from land sales. The group recognised total land sales of RM112m in FY23 (divestment of non - strategic land sales in Iskandar Puteri and petrol land sales in Johor and Selangor).

• UEMS declared an unexpected dividend of 0.75 sen (FY22: 0.5 sen), which translates into 50% payout ratio (FY22: 32% payout ratio).

Key highlights from briefing (27 Feb 24)

• UEMS achieved new property sales of RM2.1bn in FY23, ahead of guidance of RM1.5bn. 42% of new sales were attributed to Collingwood project, Australia, followed by 30% in Klang Valley and mere 3% from Johor.

• In FY23, take-up rates of its key projects in Klang Valley (The Connaught One, The MINH and Residensi ZIG) remained low at 10-42%.

• Management guided for new property sales of RM1.0bn for FY24F, on the back of RM0.8bn of planned launches. 77% of the planned GDV launches will be in Johor and the remaining 23% in the central region.

• Unbilled sales as at Dec 2023 stood at RM2.7bn – international projects, 33% (only recognised upon completion , likely in FY26), Klang Valley, 53% and Johor, 14%.

• Net gearing position improved slightly to 0.45x as at end -23 (end-22: 0.48x). However, this is higher than its peers ’ average net gearing of below 0.3x.

Reiterate Reduce with TP of RM0.75

• We retain our forecasts and TP of RM0.75 (0.55x FY24F P/BV, its 10-year mean).

• Reiterate Reduce as we feel the potential revival of the High Speed Rail project and improving Johor economic activity are already reflected in its share price.

• De-rating catalysts include poor earnings delivery and continued low take-up rates of its projects in Klang Valley.

• Upside risks include the ability to significantly monetise its landbank Gerbang Nusajaya and stronger take-up rates for its existing projects.

Source: CGS-CIMB Research - 28 Feb 2024