Investment Highlights

• Acquiring land in Seri Kembangan

• Increasing presence in central region of Malaysia

• Project GDV at RM700m

• Earnings forecast unchanged

• Maintain BUY with revised Target Price of RM1.26

Acquiring land in Seri Kembangan. UEM Sunrise Berhad (UEMS) announced that its wholly-owned subsidiary, Sunrise Alliance Sdn Bhd has inked a Sale and Purchase Agreement (SPA) with Kemaris Residences Sdn Bhd for the acquisition of 19.24 acres of land in Taman Equine, Seri Kembangan for RM109.5m.

Increasing presence in central region of Malaysia. We are positive on the land acquisition as the land acquisition will increase UEMS’s presence in central region of Malaysia. Note that UEMS is gradually shifting its focus from southern region to central region of Malaysia. Currently, UEMS’s presence in central region is mainly in Bangi and Mont Kiara.

Project GDV at RM700m. The land is strategically located 1.3km from the Equine Park MRT2 station which is currently under construction. We view the acquisition price of RM131psf fair as it is within the asking price of RM100psf – RM150psf for residential land in Equine Park. UEMS is planning to build 924 residential units on the land where Development Order has been approved. Estimated GDV for the project is at RM700m, translating into average selling price per unit of RM758k.

Earnings forecast unchanged. We do not expect earnings impact from the land acquisition in the near-term as first launch of the project is expected to take place in 2019. Hence, we maintain our earnings forecast for FY17/18. Meanwhile, the land acquisition is expected to be funded by internally generated funds. Net gearing is estimated to climb marginally from 0.43x to 0.45x post land acquisition.

Maintain BUY with revised Target Price of RM1.26. Our TP for UEMS is revised from RM1.24 to RM1.26 after inputting the latest land acquisition. Our TP if based on unchanged 40% discount to RNAV. Valuation of UEMS is attractive, trading at 29% discount to NTA. Property sales outlook for UEMS is also stable driven by its local and oversea projects.

Source: MIDF Research - 13 Dec 2017