Results

3Q13 net profit rose 114.2% yoy to RM182.8m, with YTD net profit of RM501.2m making up 79% and 92% of HLIB and consensus estimates respectively.

Deviations

None

Dividends

None

Highlights

Earnings commentary. Net profit was up 70% qoq, due to RM200m land disposal to Robert Kuok booked in 3Q.

More land sales to be booked in 3Q, from the RM222m disposal to Robert Kuok and the Ascendas JV. We also understand that the land sale to Motorsports City is likely to only be booked in 2014, pending various condition precedents.

Nusajaya continues to dominate, accounting for 80% of the overall RM2.12bn 9M new sales. Given the various cooling measures announced under Budget 2014, as well as uncertainties surrounding the actual implementation of these measures, we believe the current climate makes it highly challenging for UEMS to meet its RM3.0bn sales target in time by 4Q.

4Q launches update. UEMS is planning RM2.19bn of launches in 4Q, with the bulk of it to come from Almas (formerly known as CS-1 located in Puteri Harbour) which has GDV of RM1.4bn. However, given that UEMS has only one month left to launch this project, any delays would make it highly difficult for UEMS to meet its RM3.0bn sales target. This is especially pertinent given the bulk of its existing launches are already 80-90% taken up.

Healthy earnings visibility, with RM3.3bn unbilled sales amounting to 1.7x FY12 revenue.

Risks

Nusajaya fails to achieve critical mass; failure to achieve RM3.0bn sales target; high-beta stock.

Forecasts

Maintained

Rating

HOLD

Positives: highly liquid proxy to property sector; large war-chest for landbank acquisitions; rich in newsflow.

Negatives: Share price is highly news-driven; vulnerable to external slowdown; highest P/E multiple in the sector (>2x sector average).

Valuation

Given the sector headwinds UEMS faces currently, we maintain our HOLD call and TP at RM2.43 (40% discount to RNAV).

Source: Hong Leong Investment Bank Research- 26 Nov 2013