Results

• Below Expectation: 9MFY16 PATAMI achieved RM94m, accounting for 55% and 53% of our and consensus full year estimates respectively.

Deviations

• Mainly due to provision for LAD and lower contribution from associates and JV.

Highlights

• YoY: 3QFY16 revenue increased by 19% due to higher contribution from Residensi 22, Serena Heights and Australian projects. However, PATAMI dropped by 24% mainly due to provision for LAD of RM25m arising from delays in completion of Arcoris and Teega.
• QoQ: PATAMI fell by 33% due to lower revenue from SiLC land sales and provision for LAD as mentioned above.
• In 3QFY16, UEMS achieved new sales of RM280m (versus RM198m in 2QFY16), bringing 9MFY16 sales to RM707m, and accounting for 71% of full year sales target of RM1bn. Management remains confident to achieve full year sales target mainly contributed from existing launches.
• 9MFY16 sales were mainly contributed by Conservartory (RM222m), Melia Residences (RM102m) and Serene Heights (RM84m).
• UEM launched the second phase of Camellia with double storey terraced house priced RM590k onwards at end of Aug16. Given the affordable pricing, it received encouraging response with 62% take up rate as of mid Nov.
• Year to date, UEMS has launched three projects namely Denai Nusantara , Melia Residence Phase1-3 and Camellia in Serena Heights with a total GDV of RM558m. No major launch is scheduled for the remaining of the year. St Kilda project in Melbourne (GDV: RM671m) is targeted for launching in 1Q17.

Forecasts

• FY16, FY17 and FY18 earnings forecasts are reduced by 18%, 15% and 18% respectively as we factor in slower progress billing and lower margin assumptions.

Rating

HOLD ↔

• Despite trading at on steep discount to its RNAV, we see lack of near term catalyst with subdued sentiment for property outlook in Johor.

Valuation

• We maintain our HOLD call with TP adjusted lower from RM1.06 to RM1.03 (with unchanged 65% discount to RNAV of RM2.93) post earnings downgrade.

Source: Hong Leong Investment Bank Research - 01 Dec 2016