News

• The collective lands are valued at a base price of RM628m and max SPA price of RM1bn with escalation rate of 2.5% per annum (Refer Fig 4).

• The proposed JV development is expected to span over a maximum period of 20 years with potential GDV of over RM5bn. We understand that property launching will only commence in 2019/2020. 

• With the base price indication, UEMS land is valued at RM52 psf while Mulpha’s land at RM110 psf (based on net development area of 65 acres). The difference in valuation is mainly due to the status of land title, i.e. UEMS’ lands are still held under agricultural titles while Mulpha’s lands are already converted to commercial parcels.

• We estimate UEMS to book a net gain of RM145m (~30% of FY14 profit) given that the existing land book value is around RM25m. However, the net gain recognition will only materialize 24 months later. Impact on cash flow will be neutral.

Pros/Cons

• We are positive on the proposed JV development as it will help to maximize the value of the JVs lands. Both lands are adjacent, leading to acceleration in the development momentum in Nusajaya.

• We estimate this JV development to result in an effective NPV of RM93m to UEMS. Overall, neutral impact to RNAV. 

• In addition, UEMS still has remaining 3,000 acres of lands to be developed in Gerbang Nusajaya.

Risks

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

Forecasts

• Unchanged given the development will only start by 2019/2020.

Rating

HOLD 

• Posi tives: highly liquid proxy to property sector; large war-chest for landbank acquisitions.

Negatives

• : Concent rated in Johor; vulnerable to external slowdown;

Valuation

• Given the recent retracement of UEMS share price that is already close to our TP, we upgrade the stock from SELL to HOLD with unchanged TP of RM0.94.