INVESTMENT HIGHLIGHTS

• Disposing land in Iskandar Puteri

• Neutral on the land disposal

• Land disposal improves balance sheet

• Earnings forecast unchanged

• Maintain NEUTRAL with unchanged Target Price of RM1.24

Disposing land in Iskandar Puteri. UEM Sunrise Berhad (UEMS) announced that it is disposing 163.92 acres of freehold land in Iskandar Puteri to Country View Berhad for RM310m. The proposed disposal is expected to be completed in 3Q2018.

Neutral on the land disposal. We are neutral on the land disposal as UEMS has always been exploring to monetize its vast landbanks in Iskandar Puteri. UEMS is having vast landbanks of more than 10,000 acres in Johor while remaining acreage for Iskandar Puteri stood at 6,552 acres which makes up 50% of total landbank of UEMS. The land disposal allows UEMS to unlock value of its vast landbanks.

Land disposal improves balance sheet. The land disposal is expected to improve balance sheet of UEMS. Based on disposal consideration of RM310m, we estimate net gearing of UEMS to improve to 0.42x from 0.47x as at end 2QFY17.

Earnings forecast unchanged. Pending further details from the management, we are maintaining our earnings forecast. We maintain our core net income of RM240m and RM199m for FY17 and FY18 respectively.

Maintain NEUTRAL with unchanged Target Price of RM1.24. Our TP is based on 40% discount to RNAV. We maintain our NEUTRAL call on the stock due to flattish property market outlook for Johor.

Source: MIDF Research - 31 Oct 2017