Results

• Below Expectations: Reported 1QFY15 PATAMI of RM53.1m came in below expectations, accounting for only 11.2% and 12.4% of ours and consensus’ estimates, respectively.

Deviations

• Lower-than-expected revenue from property development and land sales.

Dividends

• None.

Highlights

• 1QFY15 revenue showed an improvement of 4% yoy, mainly contributed by Teega (RM108.9m), Summer Suites (RM50.8m) and Arcoris (RM38.9m). Qoq, revenue plunged 68.9% on the back of significantly lower land sales recorded. UEMS recorded land sales of only RM16.1m in 1QFY15 vis-a-vis RM771.0m in 4QFY14.

• 1QFY15 sales. UEMS achieved sales of RM390.1m (1QFY14: RM123.0m), mainly contributed by Aurora Melbourne Central of RM251.4m. There were no new launches during the quarter.

• We understand from the management (during conference call) that there is still remaining of approximately AU$180-190m more to be recognised from Aurora.

• Revenue breakdown. UEMS’ revenue of RM417.4m consist of non-Nusajaya property development (RM167.0m), Nusajaya property development (RM208.7m), land sales (RM16.1m) and others (RM25.6m).

• Earnings visibility. YTD unbilled sales stood at RM4.8bn, representing 1.55x of UEMS’ FY14 revenue.

Risks

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

Forecasts

• Unchanged, as we expect land sales to occur in the remaining 9M. Furthermore, management target to reach RM500m net profit remains intact.

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 RM1.58 (unchanged 60% discount to RNAV or implied 15.1x FY15E P/E).

Source: Hong Leong Investment Bank Research - 22 May 2015