Results

• Below Expectations: Reported 9MFY14 PATAMI of RM207.5m came in below expectations, accounting for only 50% and 41% of ours and consensus’ estimates, respectively.

Deviations

• Mainly due to the lack of land sales in 9MFY14. However, we gather that bulk of land sales will be recorded in 4QFY14, and believe it could make up for the low land sales in 9MFY14.

Dividends

• None.

Highlights

9MFY14 impacted by lack of land sales. 9M14 revenue declined 32% yoy in the absence of land sales, vs. land sales which was reported gradually in every quarter of 9MFY13. However, we were given to understand that UEMS will be reporting bulk of its FY14 land sales in 4Q, approximately amounting to an effective sales of RM700m.

Lack of new launches in 3Q, with just a modest RM40m launch for Phase 1B of Nusa Idaman in July.

FY14 sales target. UEMS highlighted that its sales target of RM2bn is still on-track .

Aurora, Melbourne. The residential part of the project (GDV: AU$570m) was launched in Oct and have received overwhelming response to date, with approximately 95% booking YTD with majority to be converted to S&P sales. We understand that Aurora is selling at approximately AU$10k/sq m.

Earnings visibility. YTD unbilled sales stood at RM4bn, representing 1.65x of UEMS’ FY13 revenue.

FY15 launches. Management also guided that UEMS’ will have a pipeline GDV of approximately RM4bn, mainly coming from Serene Heights, D ‘Estuari, Nusa Idaman, Almas, Aurora KL and Sinaran Hills.

Risks

• Slowdown in Nusajaya sales; failure to achieve sales target; high-beta stock.

Forecasts

• None, as we expect stronger 4Q largely coming from its land sales (Gerbang & Motorsport City land). These two lands could total RM250m PATAMI.

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 (more than 2x sector average).

Valuation

• Given the sector headwinds UEMS faces currently, we maintain our HOLD call. TP is also maintained at RM1.98 (unchanged 19x FY15E P/E or 50% discount to RNAV).

Source: Hong Leong Investment Bank Research - 27 Nov 2014