Results

• Slightly above our expectations but below consensus: 4QFY15 PATAMI fell 74% YoY but surged 51% QoQ, bringing FY15 PATAMI to RM257m or accounting for only 107% and 90% of ours and consensus’ estimates, respectively.

Deviations

• Better-than-expected revenue recognition from property development.

Dividends

• Declared dividend of 1.6 sen per share versus our ful l year forecast of 1.7 sen per share.

Highlights

• YoY: FY15 revenue dropped by 55% mainly due to reduction in land sales. UEMS recognised RM882m worth of land sales in FY14 versus merely RM24m in FY15.
• UEMS achieved sales of RM1173m in 4Q15 (versus RM583m in 3Q15), bringing FY15 sales to RM2.35bn, accounting for 118% of company full year target of RM2bn. FY15 sales were mainly contributed by Aurora Melbourne (RM721m), Conservatory Melbourne (RM622m) and Sefina Mont Kiara (RM230m). UEM has launched about RM2.63bn worth of projects in FY15. UEMS is targeting to launch RM1.2bn worth of projects in FY16 (84% from Australia and 16% from Malaysia). Sales target for 2016 is RM1.5bn versus our estimate of RM2.5bn. UEMS will focus on launching more landed and affordable houses while clearing existing inventory in Johor.
• Take up rate for Sefina, Mont Kiara (GDV: RM307m) has increased from 54% to 76% QoQ while sales of Conservatory has increased from 24% to 55%. However, sales of Estuari Harbour (GDV: RM631.9m, launched in Aug15) were slow with take up rate merely increased from 1% to 3%, further supporting our view of oversupply situation in Johor. YTD unrecognised revenue stood at RM4.7bn, representing 2.9x of UEMS’ FY15 revenue.

Forecasts

• FY16 and FY17 earnings were reduced by 19% and 27% respectively after we reduced our sales target from RM2.5bn to RM1.5bn.

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

We maintain our HOLD call with TP adjusted slightly from RM0.94 to RM0.92 (with an unchanged 70% discount of RNAV to reflect risk of Johor concentration) posted earnings downgrade.

Source: Hong Leong Investment Bank Research - 26 Feb 2016