Results

4Q13 net profit declined 61.3% yoy to RM78m, with YTD net profit of RM579.1m making up 92% and 104% of HLIB and consensus estimates respectively.

Deviations

Slower than expected progress billings in 4Q.

Dividends

4 sen DPS was declared in 4Q13, bringing YTD DPS to 4 sen, or 133% of our 3.4 sen DPS forecast.

Highlights

A weak finish to the year. 4Q revenue was down 17% yoy and qoq due to: (1) The completion of MK28 in Dec 2012; and (2) The absence of earnings from land sales in 4Q.

FY13 brought down by weak 2H. UEMS has historically reported strong 2H numbers as compared to 1H but this was not the case in FY13. 1H saw major land sales booked in such as RM300m for Commercial North in 1Q.

Successfully achieved RM3.0bn sales target. Thanks to RM868m in new sales achieved in 4Q, UEMS achieved its FY13 sales target. There was a rush to sign SPA for its key projects such as Residensi 22 (RM355m sales in 4Q) and Teega in Puteri Harbour (RM127m in 4Q). The group has set a sale target of RM3.2bn in FY14, with RM2.2bn from Nusajaya.

Nusajaya continues to dominate, accounting for more than 70% of the overall RM3.0bn FY13 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 group could face challenges repeating its RM3.0bn sales feat in FY14.

Healthy earnings visibility, with RM4.1bn unbilled sales amounting to 1.7x FY13 revenue.

Risks

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

Forecasts

Rolling over our numbers, our FY14-15 earnings forecast are reduced by 1.5-1.8%.

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 RM2.23 (45% discount to RNAV). This values UEMS at 15x FY15E P/E, which is currently at the top end of the sector.

Source:Hong Leong Investment Bank Research - 26 Feb 2014