Period  2Q13 / 1H13

Actual vs. Expectations  1H13 net profit of RM318m is considered broadly in line even though it is at 58% of street’s and our estimates. This is because the 1Q13 result was distorted by the recognition of Puteri Harbour land sale to Liberty Bridge for RM0.4b.

 Excluding the said land sale, 1H13 sales of RM1.71b (+115% YoY) is on track to meet the FY13E target of RM3.0b (refer overleaf).

Dividends  None, as expected.

Key Results Highlights  YoY, 1H13 net profit was up 97% propelled by the sale of land to Liberty Bridge. Hence, 2Q13 net profit was flat YoY at RM107m due to a lumpy land sale (RM90m) in 2Q12 causing a high base effect. Stripping off the land sales, we estimate that 2Q13 bottomline grew c. 30% YoY on growth in billings.

 QoQ, 2Q13 net profit was lower because of the sale of land to Liberty Bridge. Without the land sales, we estimate that earnings grew >100% to RM107m on the back of strong billings.

Outlook  UEMS will launch RM3b worth of projects in 2H13 and assuming a conservative 50% take-up rate, we are confident the FY13 sales target is achievable especially when c.75% of the launchings are in Nusajaya which will benefit from the weaker Ringgit. Management is also confident of meeting its key KPIs. We understand that Ascendas’ Industrial Park (IP) @ Gerbang Nusajaya has received its land titles meaning launches could start by year-end. (Refer overleaf).

Change to Forecasts  No changes to estimates. Unbilled revenue of RM3.27b provides 1.5 years visibility. (Refer overleaf).

Rating   Maintain OUTPERFORM

Valuation  The stock hit a record foreign shareholding level of 21.9% in Apr-13 and it is no surprise that it has been severely bashed-down given the recent foreign fund outflows and potential threats of policy tightening measures (e.g. RPGT hikes).

 We are still bullish on Johor as we think demand growth will be the strongest compared to other states.

 However, we are cognizant of potential tightening measures to cool down property prices. Thus, we lower our TP to RM3.70 (from RM4.09) based on a wider 20% discount to FD RNAV (from 12%).

 We maintain our OUTPERFORM recommendation as our TP still implies promising total returns of 53% while valuations are approaching trough levels.

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

Source: Kenanga