• 1HFY17 earnings within expectation

• Sales of RM392m secured in 1HFY17

• Earnings estimate maintained

• Focus on affordable and mid-segment price range property

• Maintain NEUTRAL with TP of RM1.24

1HFY17 earnings within expectation: UEM Sunrise Berhad (UEMS) 1HFY17 Core Net Income (CNI) of RM185.2m was within expectation. Although it made up 77%/81% of ours/consensus full year CNI forecast, we expect 2HFY17 earnings to moderate in the absence of significant land sale. Note that the 1HFY17 is exceptionally strong due to the RM115m of profit from the disposal of 4.9 acres of land in Canada for CAD113m (or RM371m). Our core net income excludes RM27m of provision for liquidated ascertained damages, RM7m of forex loss and other one off items.

Sales of RM392m secured in 1HFY17. Although this makes up only 33% of the RM1.2b target, we are maintaining our sales target. We gather that UEMS has lined up more property launch for 2HFY17. The biggest project by GDV is Mayfair, St Kilda Melbourne (GDV: RM1.1b). Unbilled sales of RM3.3b represents 1.8 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.

Focus on affordable and mid-segment price range property. It was mentioned in UEMS’ Bursa announcement that “The overall domestic property market is consolidating with products within the affordable and mid-segment price range expected to attain favourable demand especially in key selected locations”.

Maintain NEUTRAL with Target Price of RM1.24. Our TP is based on 40% discount to RNAV. Despite the good earnings growth seen in 1H2017, we maintain our NEUTRAL call on the stock as we expect earnings growth to moderate in 2H2017.

Source: MIDF Research - 24 Aug 2017