Results

• In line: FY17 core PATAMI achieved RM182.3m, accounting for 105.2% and 76.9% of HLIB and consensus full year estimates, respectively.

Deviations

• None.

Dividends

• Proposed a final dividend of 1 sen (FY16: none).

Highlights

• QoQ: Revenue increased by 4.5% largely due to higher with progressive billing from its international projects (Aurora and Conservatory) and monetisation of inventories, partially offset lower contribution from local developments. Core PATAMI improved by 9.0% after excluding the gains from land sale and an impairment of circa RM30m at JV level.
• YoY: Similarly, 4Q17 revenue grew by 19.8% with higher progressive billings from international and inventory monetisation initiatives. However, core PATAMI contracted by 5.1% due to significant lower contributions from JV projects and higher marketing expenses.
• FY17: Core PATAMI was up 23.8%, aided by higher revenue (+57.7%) from the progress made by its international development, monetisation of inventories for local development and strategic land sales.
• FY17 sales achieved RM1.5bn, which is higher than the target of RM1.2bn with commendable bookings for Solaris Parq Residences, Dahlia @ Serene Height Bangi and Mayfair in Melbourne. Unbilled sales stood at RM4.8bn representing a cover ratio of 3.3x on FY17 revenue.
• For FY18, the company is targeting sales of RM1.2bn, backed by planned launches worth some RM1.0bn such as Serimbun (GDV: RM139m), Iris (RM135m), Kiara Kasih (RM218m), MK 27 (RM250m), Serene Heights (RM53m).
• UEMS is adamant on continuing its successful campaign on asset monetisation initiatives to reduce the inventory of more than RM600m. Besides, RM300m of non-strategic assets are also being identified for disposal.
• Moving forward, management will focus on rebalancing its port folio to focus more on central region on more affordable products following the shift of demand by the market.

Forecasts

• Unchanged.

Rating

HOLD ↔; TP: RM1.18 ↔

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

Valuation

• Maintain HOLD call with unchanged TP of RM1.18 (based on unchanged 60% discount to RNAV of RM2.94).

Source: Hong Leong Investment Bank Research - 28 Feb 2018