Results

• Within Expectation: 1Q17 PATAMI achieved RM61.3m, accounting for 27.4% and 28.1% of our and consensus full year estimates respectively.

Dividends

• None.

Highlights

• QoQ: PATAMI improved by 15% due to the revision of estimated costs for completed projects for the quarter under review and profit from land sales despite a 13% contraction in revenue.
• YoY: 1Q17 revenue increased by 110.2% due to higher contribution from Residensi 22, Aurora, conservatory. PATAMI grew by 19x from a low base last year, in tandem with the increase in revenue and revision of estimated cost for completed projects.
• In 1Q17, UEMS achieved new sales of RM169.4m (versus RM229.2m in 1Q16), mainly driven by southern region (40%) with improved take-up rate for Estuari, Puteri Harbour, followed by central region projects (37%) such as Serene Heights, Bangi.
• On international side, sales were mainly contributed by The Conservatory and Aurora in Melbourne with take up rate of 89% and 99%, respectively.
• UEMS is targeting sales of RM1.2bn (+20%) in FY17. The is on the back of four projects launches with total GDV of RM1.7bn comprising i) D? Santuari (GDV: RM107m), ii) Solaris 3 (GDV: RM735m), iii) Serene Heights (GDV: RM144m) and iv) St Kilda, Melbourne (GVD: RM713m).
• To note, the sale of industrial land at SILC (GDV: RM500m) that was launched in Feb 17 is not inclusive in the overall property sales target of RM1.2bn.
• Unbilled sales stands at RM5bn (up from RM4.8bn last quarter), representing a cover ratio of 2.7x on FY16 revenue.

Forecasts

• Unchanged.

Rating

HOLD ↔

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

Valuation

• We maintain our HOLD call with unchanged TP of RM1.18 (with unchanged 60% discount to RNAV of RM2.94).

Source: Hong Leong Investment Bank Research - 18 May 2017