INVESTMENT HIGHLIGHTS

• 1QFY17 earnings within expectation

• Sales of RM169m secured in 1QFY17

• Earnings estimate maintained

• Slightly positive outlook on the market by management

• Maintain NEUTRAL with higher TP of RM1.24

1QFY17 earnings within expectation: UEM Sunrise Berhad (UEMS) 1QFY17 Core Net Income of RM66.7m was within our expectation as it made up 28% of our full year forecast. However, it beats consensus as it made up 34% of consensus full year estimate possibly due to underestimation on the value of land sale. As expected, no dividend was announced.

Sales of RM169m secured in 1QFY17. Although this makes up only 14% of the RM1.2b target, we are maintaining our sales target of RM1.2b as UEMS still has lined up property launch with total GDV of RM1.7b for the rest of FY17. Out of this, the biggest projects are Solaris 3, Damansara (GDV: RM735m) and St Kilda Melbourne (GDV: RM715m). Unbilled sales of RM3.7b represent 2.0 years of earnings visibility.

Earnings estimate maintained. We maintain our FY17 Core Net Income of RM240m. FY18 Core Net Income of RM199m is also maintained.

Slightly positive outlook on the market by the management.

Management is expecting a flat to slight sales growth for the local property market. It was mentioned in UEMS Bursa announcement that “It appears that overall market has bottomed last year and we are seeing encouraging signs via growth in loans for purchase of residential properties in the first 3 months of 2017.

Maintain NEUTRAL with higher Target Price of RM1.24. We have reduced our discount to RNAV to 40% (from 50%) as we believe that the risk for Johor property market has been reduced following the strong sales growth seen for UEMS Johor market. Maintain NEUTRAL on the stock as good sales growth from the local market is neutralised by lower sales from Melbourne, Australia

Source: MIDF Research - 18 May 2017