• FY16 earnings within expectation

• FY16 sales of RM1.37b exceeded management target of RM1.0b

• Sets a conservative sales target of RM1.2b in FY17.

• Maintain NEUTRAL with TP of RM1.03

FY16 earnings within expectation: UEM Sunrise Berhad (UEMS) FY16’s Core Net Income of RM185.3m was within our expectation of RM180.1m. However, it is better than consensus estimate of RM149.0m as consensus may have underestimated the value of land sale. No dividend was announced for FY16 and this is below our expectation of 1.1 sen. We believe that the Group is conserving cash to face the challenging market condition in FY17.

FY16 sales of RM1.37b exceeded management target of RM1.0b. FY16 sales of RM1.37b surpassed management and our target of RM1.0b. In the 4QFY16, the Company managed to secure sale of RM369m from Almas, Puteri Harbour and this has boosted the sales. Besides that, Conservatory in Melbourne sale is RM248m followed by Serene Heights (Bangi)’s RM130m. Unbilled sales of RM5.1b represents 2.8 years of earnings visibility.

Sets a conservative sales target of RM1.2b in FY17. Despite the good sales achieved in FY16, management has set a lower sales target of RM1.2b in view of the slow property market currently. Management has lined up property launch with total GDV of RM1.7b for FY17. Out of this, the biggest projects are Solaris 3, Damansara (GDV: RM735m) and St Kilda Melbourne (GDV: RM715m).

Maintain NEUTRAL with Target Price of RM1.03. Earnings estimate for FY17 is maintained. Valuation methodology is unchanged based on 50% discount to RNAV. Maintain NEUTRAL call on the stock as unexciting property market outlook in Johor has likely to be priced in as the share price is at discount of 16% to its NTA of RM1.37

Source: MIDF Research - 28 Feb 2017