Kenanga Research & Investment
UEM Sunrise - JV to Expedite Gerbang Nusajaya
MARKET PERFORM ↔
Target Price: RM1.07 ↓
News
UEMS has entered into a 50:50 JV cum shareholder’s agreement with Mulpha International Berhad (Mulpha) to establish JV Axis S/B (JVASB) which will in turn be the joint-development vehicle for 38 parcels of land spanning 231.4ac in Mukim Pulai, Johor. The land is actually part of the Gerbang Nusajaya land which is adjacent to Mulpha’s Leisure Farm. UEMS also entered into a Master Agreement (MA) with Mulpha and JVASB for the disposal of the land to JVASB. The agreed base price of the land is RM627.8m while the maximum price is RM1.0b depending on when the transactions take place. The MA is conditional for 24 months. The JV land will be a mixed development with GDV of RM5b over a maximum period of 20 years. (Refer overleaf for details).
Comments
We were not surprised by this announcement as UEMS had earlier expressed that they will be exploring JV options to increase realisation of its assets, particularly expediting the Gerbang Nusajaya developments. This particular deal makes sense since the landbank shares infrastructure and will benefit from more synergistic efforts in the area. Overall, we are long-term positive on the deal. Land price is fair given that the land-to-GDV ratio is at 13%. Impact to net gearing after the land disposal (likely in FY18) is less than a 5% reduction in net gearing vs. our current FY15E gearing of 0.3x. We expect a land disposal PATAMI of RM109m (based on the ‘base price’) which will likely take place in FY18. However, in the near-term, we are neutral as it will take more than two years to see significant contributions while the deal is still in its early days.
Outlook
4Q15 results release is around the corner and we are anticipating their FY16 sales guidance, which is likely to be flat at best.
Forecast
No changes to earnings as we believe significant contributions will only commence from 2018 onwards.
Rating
Maintain MARKET PERFORM
Valuation
No significant impact to our FD RNAV of RM4.29. While we are near-term neutral on the deal, we are revisiting our sector valuations with a downside bias. Ahead of that, we widen our FD RNAV discount factor to 75% (from 72%) or close to its historical peak discount of 80%. Thus, our TP is lowered to RM1.07 from RM1.20. The applied discount is one of the steepest under our coverage due to its high exposure in Johor. We also see no near-term catalysts to rerate the stock, other than the privatisation rumours, which we reckon is unlikely.
Risks
(i) Balance sheet risk, (ii) weaker-than-expected property sales, (iii) higher-than-expected sales and administrative costs, (iv) negative real estate policies, and (iv) tighter lending environment.
Source: Kenanga Research - 17 Feb 2016
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The JV by UEMS with Mulpha is REALLY A BIG GOLDEN WINDFALL FOR
MULPHA More Than UEMS
Who is it so?
Answer:
When PLUS NORTH SOUTH HIGHWAY WAS BUILT IT CUTS MULPHA'S LANDS INTO 2 SECTIONS
One is LEISURE FARM BUNGALOW PRECINCT
Another is LEISURE FARM NORTH
Now these JV will Create Connecting Roads for both Mulpha's Precious Lands
2 Positive Factors emanating
1) THE RM5 BILLIONS JV WILL CREATE GOOD PROFITS
2) THE ENHANCED CONNECTIONS WILL CAUSE LEISURE FARM LAND VALUE TO GO UP BY ANOTHER 20%
3) IMPENDING FUTURE HSR STATION IN VICINITY WILL BOOST LAND FURTHER BY ANOTHER 64% (According to Japan HSR STATION VICINITY real estate pattern?)
BETTER LOAD UP ON MULPHA FOR MULTI YEARS BOOM Or MULPHA YEARS BOOM?
2016-02-17 10:32