News   UEMLAND entered into a Master agreement (MA) with Ascendas Group to undertake development of an integrated tech park over c. 519 ac in Gerbang Nusajaya (c. 4500ac in total). A JV Co between UEMLAND (40%) and Ascendas (60%) will be established to buy the land progressively (from UEMLAND) and undertake the development over 9 years; the first tranche involves Phase 1, Plot A (120ac) at a land base price of RM13.00psf. It is an agricultural land with zoning approvals for industrial development (refer overleaf). 

Comments   Positive on the deal as it will help grow economic activity and employment in Nusajaya which will fuel the area's population growth ' a key success factor for Nusajaya. Additionally, Ascendas will be able to bring-in new industrial players. We have always opined that Gerbang Nusajaya will be used for such purposes although we did not anticipate the strategic tie-ups with Singapore's Ascendas. 

 Total GDV of RM3.7b over 9 years, although development period could be shortened if the JV Co expedites land acquisitions from UEMLAND. The project will feature >400 factories with 34,000 employees.  We estimate 25% project gross margins. However, earnings contributions will only be significant in  FY14E as the project is still at its planning stage and will likely launch Phase 1 in 4Q13. 

Outlook  The group will be launching its CS2@Puteri Harbour (GDV: RM0.9b) mixed development project soon. However, we understand a few projects (e.g. Angkasaraya) which were earmarked to be launched this year may be delayed and may have implications on its sales targets. 

Forecast  Raise FY12E net profit by 4% to RM377m. Although project contributions are not immediate, we have imputed net land sale gain of Phase 1, Plot A. We will factor for the remaining land sale gains upon further timeline clarity. We are still estimating FY12E sales of RM2.7b (UEMLAND's target is RM3.0b), pending further clarity during the upcoming results. 

Rating Maintain MARKET PERFORM

 We raise TP to RM2.07 as the venture is a major catalyst for Gerbang Nusajaya which will lend strength to future sales and stock sentiment. However we maintain our call as sales for the year may be softer than expected and maybe subjected to higher GE risks.

Valuation   Raise TP to RM2.07 (from RM1.85). The deal raises our FD SoP RNAV by 3% to RM3.38 and we are also reducing our FD SoP RNAV discount rate to 39%* (from 44%). 

Risks  Unable to meet sales target. An up-cycle in Singapore's property sector. GE and sector risks, including negative policies.