UEMS announced that it is injecting 234.5 acres of land to a JV owned by UEMS (40%) and Ascendas (60%) for RM289.2m. We are positive on this development. Post-disposal, UEMS will continue to enjoy income derived from the JV. In addition, its JV partner is an experienced industrial park developer with regional experience. Bucking the success of the current development in Nusajaya Tech Park, we expect the expansion will continue to be well received, especially given its strategic location with proximity to major ports and airport. Maintain HOLD with an unchanged TP of RM0.23 based on a discount of 88% to our estimated RNAV of RM1.95. While we are positive on this development, we remain cautious on the group’s near term prospects as we anticipate weakening sales momentum due to the deferment of launches.

NEWSBREAK

UEMS announced on 15 Dec (Thu) that it is injecting 234.5 acres of lands (Plot B and Phase 2 lands) to Nusajaya Tech Park Sdn Bhd (NTPSB) for a total consideration of RM289.2m (see Figure #1). NTPSB is a JV company owned by UEMS (40%) and Ascendas (60%). Under the JV, UEMS is the shareholder, while Ascendas is the developer. Post land injection to NTPSB, it will have a total landbank size of 371 acres and total GDV of RM1.5bn to be developed over the next eight to ten years.

HLIB’s VIEW

Background. To recap, UEMS and Ascendas (subsidiary of Capitaland) had in 2012 jointly agreed to undertake the development of an industrial integrated tech park (Nusajaya Tech Park) under the JV - NTPSB. Nusajaya Tech Park (NTP) launched its first product in June 2014. The industrial park is currently home to many multinational corporations as well as SMEs, including Telekom’s data centre, Barnes Aerospace (US) and GKN Aerospace (UK) and more. The JV derives its income from a combination of (i) industrial properties sale (built-to-suit or ready built factories), (ii) rental income; and (iii) industrial land sale (for buyers that want bigger lands such as the land sale to Telekom for the establishment of its data centre).

Positive on the development. As UEMS is a shareholder of the JV, post land disposal to the JV, UEMS will continue to enjoy the income derived from the JV. The JV will be able to capitalize on Capitaland’s vast experience and expertise in industrial park development, which includes industrial park developments in Singapore, China and India. In addition, NTP is also strategically located near to major ports and airport including Port of Tanjung Lepas (5 mins drive), Jurong Port (28 mins drive) and Senai airport (25 mins drive) (see Figure #2). Bucking the success of the current development in NTP, we expect the expansion will continue to be well received.

Forecast. We make no changes to our forecast as this development was already under our pipeline assumptions.

Maintain HOLD with an unchanged TP of RM0.23 based on a discount of 88% to our estimated RNAV of RM1.95. While we are positive on this development, we remain cautious on the group’s near term prospects as we anticipate weakening sales momentum due to the deferment of launches. Nonetheless, the downside of the share price would be supported by its net asset per share of RM1.33.

Source: Hong Leong Investment Bank Research - 16 Dec 2022