News      UEMLAND has entered into a shareholders agreement with Iskandar Coast S/B (ICSB), an 80% subsidiary of Iskandar Investment Bhd – a Khazanah Nasional entity, to form an 80:20 JV company, Nusajaya Premier S/B (NPSB). The JV Co will acquire vacant freehold agricultural land adjacent to Puteri Harbour and Kota Iskandar, which forms part of the 4,500ac landbank disposed off to Khazanah as part of UEM World’s de-gearing exercise. The acquisition involves 63.05ac from ICSB at RM48.1m and 15.32ac from UEMLAND for RM17.1m, amounting to a total consideration of RM65.2m.

Comments     The acquisition comes as no surprise to us as it is part of UEMLAND’s longer term plan to buy back its landbank from Khazanah. We like the acquisition as Puteri Harbour landbank is depleting fast while traction on the area is growing, particularly with Puteri Harbour’s new CIQ and ferry services.

Land price of RM19.10psf is reasonable, considering that back in Apr-12, UEMLAND bought back 122.3ac land from Khazanah at RM17.50psf. Impact to balance sheet will also be minimal while it is comfortably sitting on low net gearing of 0.1x.

No project details provided yet, but we estimate GDV of RM4.4b for the combined 78.4ac land. This assumes a conservative 70% land utilisation rate and Puteri Harbour’s TM2 GDV/ac of RM80m. Assuming so, our FD SoP RNAV increases by 4 sen to RM3.61. Project commencement will be at least 4-5 years away as earthworks and infrastructure needs to be undertaken first.

Outlook     Management FY13E KPIs are; 1) sales target of RM3.0b (+22% YoY) on the back of RM4.0b new launches; 2) PATAMI growth of 20% which will yield ROE of 10% (refer overleaf).

Forecast    No changes to earnings estimates as development will take place further into the future.

Rating     Maintain OUTPERFORM

Post GE, UEMLAND will be our TOP PICK for 2QCY13 as it is the best Iskandar Malaysia (IM) news flow proxy and will likely benefit from valuations catch-up upon listing of Iskandar Waterfront Holdings (IWH). It also has the highest Johor exposure amongst developers in our coverage.

Valuation     Maintain TP of RM3.25 based on slightly wider discount of 10%* (from 9%) on higher FD RNAV of RM3.61. Although our RNAV is higher due to the new project, we are cognisant that the land is not immediately developable at the moment and thus, prefer to maintain our current TP.

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

Source: Kenanga