UEMS reported 4QFY19 core PATMI of RM111.7m (+311.6% QoQ, +328.9% YoY), which brings the FY19 sum to RM232.1m (+201.4% YoY). New sales of RM414m was achieved in 4Q19, bringing FY19 sales to RM1134m which represents 94.5% of UEMS’ full year sales target. Unbilled sales stood at RM1.8bn, representing a cover ratio of 0.9x cover ratio. For FY20, UEMS is setting higher sales and GDV launch targets, both at RM2bn. Maintain HOLD with a lower TP of RM0.64 (from RM0.75) based on a 75% discount to estimated RNAV of RM2.58 after imputing a higher discount to reflect the ongoing soft Malaysian market coupled with a declining cover ratio from the settlement of Australian projects.

Within expectations. UEMS reported 4QFY19 core PATMI of RM111.7m (+311.6% QoQ, +328.9% YoY), which brings the FY19 sum to RM232.1m (+201.4% YoY), forming 101.7% and 95.6% of our and consensus full year forecasts, respectively. FY19 core PATMI sum has been arrived after excluding -RM11.1m of EIs, which mainly includes -RM51.1m of impairment of interests in a JV, -RM25.9m of a staff separation scheme and +RM55.2m of land sale gain. No dividends were declared.

QoQ. Core earnings rose 311.6% to RM111.7m largely due to a larger settlement of Australian projects (i.e. Conservatory and Aurora in Australia) in 4QFY19.

YoY/YTD. Core earnings improved 328.9%/201.4% to RM111.7m/RM232.1m on the back of large settlements from the Australian projects coupled with a lower effective tax rate YoY.

New sales of RM414m was achieved in 4Q19, bringing FY19 sales to RM1134m which represents 94.5% of UEMS’ full year sales target. Unbilled sales stood at RM1.8bn, representing a cover ratio of 0.9x cover ratio.

Outlook. For FY20, UEMS is setting higher sales and GDV launch targets, both at RM2bn. While the sales target appears to be +76% YoY, we note that 20% (RM400m) of it comprises of land sales from SiLC and c.11% (RM213m) stems from an office block in Solaris Parq. Despite the optimistic goal, we remain cautious on the certainty of the sales target amidst the ongoing soft market sentiments. FY20 may also see the launch of a residential tower in Durban Point, South Africa, if a JV partner is secured in time. With regards to landbanking, UEMS is still on the lookout for new opportunities both in the local market and/or overseas (including Melbourne, Sydney, and London).

Forecast. Unchanged. Maintain HOLD with a lower TP of RM0.64 (from RM0.75) based on a higher discount at 75% (from 70%) to estimated RNAV of RM2.58 to reflect the ongoing soft Malaysian market coupled with a declining cover ratio from the settlement of Australian projects. We see a lack of near-term catalyst given the subdued sentiment for property outlook in Johor. FY20 will see lower earnings YoY as bulk of the Australian project earnings have been recognised in FY19.

Source: Hong Leong Investment Bank Research - 2 Mar 2020