Journey to Wealth

UEM Land Holdings - OUTPERFORM - 13 June 2012

kiasutrader
Publish date: Thu, 14 Jun 2012, 09:32 AM
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News  UEMLAND will be adopting its maiden dividend policy, which targets a 20%-40% payout of its PATAMI subject to the needs and health of the company. We also understand that the group's dividend payout will be in the form of single-tier dividends.  
   
Comments  The announcement came as no surprise to us as UEMLAND has previously said it had the intention to do so by early 2012.  

Assuming a 30% payout of PATAMI, we estimate FY12-13E NDPS of 2.7-3.5  sen (1.4%-1.8% yield). We may raise our FY12-13E NDPS to a 40% payout upon further management guidance; if so, FY12-13E NDPS would be 3.6-4.6 sen (1.9%-2.4% yield). 

Although large developers' yields range between 3%-4%, we are positive on the company's dividend policy above as it is a step in the right direction in terms of rewarding long term shareholders. 

Not worried about cash flow. Although the group has done two major land acquisitions this year (Puteri Harbour extension and Desaru land) amounting to RM579m, we are not concerned about cash flow given our expected strong sales for the group, which should be driven by an uptick in demand for Johor or Iskandar Malaysia properties. Our FY12-13E net gearing will increase from 0.15x each to 0.17x-0.18x, which is still within our comfort zone of <0.5x. 
   
Outlook  Although 1Q12 sales appear weak, management is confident of meeting its FY12E KPI target (sales: RM3.0b; ROE: 10%). We are also looking forward to potential en bloc sales, new launches and Nusajaya land sales by 2H12.
   
Forecast Maintaining our FY12-13E earnings of RM393mRM501m on the back of our assumed RM3.0bRM3.8b sales targets. Unbilled sales of RM1.85b provide c.1 year of visibility.
    
Rating Maintain OUTPERFORM
Beneficiary of the burgeoning demand for properties in Iskandar Malaysia, with a 2011 tipping point as the catalyst with spill-over impact from Singapore.
   
Valuation  No changes to our TP of RM2.65 based on a 19%* discount to FD SoP RNAV of RM3.28.
   
Risks Unable to meet sales target. An up-cycle in Singapore's property sector. Sector risks, including negative policies.

Source: Kenanga
UEMS (5148)
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