Although UEM Land's (ULHB) 1QFY12 net profit only accounted for about ~15% of our and consensus' FY12 net profit forecasts, we deem the results in line with both estimates given that 1Q is typically the weakest quarter, and on our expectations that the company's performance would be robust for the rest of the year. We maintain our forecast and Trading Buy recommendation on ULHB, at an unchanged FV of RM3.17, based on a 10% discount to our RNAV valuation.
Within expectations.ULHB's net profit of RM54.2m in 1QFY12 accounted for about 15.6% and 15.2% of our and consensus' FY12 forecasts. We view the results as in line with our estimates since 1Q is typically the weakest quarter for the company, largely on account of seasonal factors, and our expectations of a stronger showing in the remaining quarters, driven by robust progress billings and some potential strategic land sales this year. As at end-March 2012, ULHB's unbilled sales totaled RM1.85bn. We think with several future launches in the pipeline, the group should be able to further improve, or at least sustain its current unbilled sales, which will subsequently provide strong future earnings visibility.
Good start to 2012. Revenue surged 61.8% y-o-y, driven by higher progress billings while net profit was up two-fold y-o-y, in line with the higher revenue and improved margins. EBIT margin jumped to 24.9% in 1QFY12 compared with 17% in 1QFY11, possibly owing to further consolidation of Sunrise's contribution, as well as synergy arising from the acquisition of the latter and completion of the takeover in early January last year. Owing to seasonal factors arising from the fewer working days and an exceptionally strong 4QFY11 boosted by strategic land sales, the company's 1QFY12 was significantly weaker q-o-q.
Maintain Trading Buy.We maintain our forecasts and Trading Buy recommendation on ULHB, at an unchanged FV of RM3.17, based on a 10% discount to our RNAV valuation. As its profitability continues to improve, the group's PER multiple will accordingly compress to more reasonable levels compared to its elevated historical PER multiples. With its strong exposure in Nusajaya, ULHB remains the best proxy to Iskandar Malaysia, which is widely expected to reach its inflection point this year following the completion of several catalytic projects in the region.