News     Selling 12.518ac of Puteri Harbour land (TM2, TM3) for RM182.0m or RM334psf to Southern Marina Development S/B (SMD). SMD is 70%:30% owned by Huge Quest Realty S/B (HQR) and Tanjung Bidara Ventures S/B (TBV); in turn, HQR is 60%:40% owned by Kuok Brothers S/B and PPB Group Bhd while TBV is wholly owned by Khazanah Nasional.

Comments      We are positive but not surprised. The sale is expected as we understand that UEMLAND will be either looking for JV partners or outfight land sales to boost speed of Puteri Harbour developments while tapping into new markets from other developers. The wealth experience of Kuok Brothers, particularly given the Shangri-La group of hotels branding, will further strengthen Puteri Harbour’s potential. We also are heartened that such a transaction is taking place during the GE period, implying strength to the Iskandar Malaysia story.

Sale price of RM334psf is higher than the Jan-13 disposal of 43.6ac Puteri Harbour land (Commercial South) for RM211psf to Liberty Bridge S/B which comprised of four heavy-hitting individuals. However, we think the current pricing is fair as the land size acquired is smaller than the last one while it enjoys the Private Marina frontage.

Expect gross gains on disposal of RM108.0m (net: RM81.0m) or 59% gross margin which is similar to the last transaction. The disposal will lower our FY13E net gearing from 0.14x to 0.11x.

Outlook     Developments will follow within 2 years of the SPA completion. We are heartened by this as it will expedite the development of Puteri Harbour, which will ultimately boost the project’s value, particularly when UEMLAND has acquired 200.7ac of contiguous landbank to Puteri Harbour (refer overleaf).

Forecast     Increasing FY13E net profit by 15% to RM613.6m due to the land sale gains.

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).

Valuation      Impact of the land sale only increases our FD RNAV by 1 sen to RM3.62. Hence we maintain our TP of RM3.25 based on unchanged 10%* discount to the FD RNAV of RM3.62.

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

Source: Kenanga