INVESTMENT HIGHLIGHTS

• FY17 earnings below expectation

• Higher earnings in FY17

• New sales exceeded target in FY17

• Maintain BUY with unchanged Target Price of RM1.26

FY17 earnings below expectation. UEM Sunrise Berhad (UEMS) registered core net income of RM4.7m, bringing cumulative earnings in FY17 to RM276.2m (+49%yoy). FY17 earnings came in below our expectation at 85% of our full year estimates due to the higher-thanexpected marketing and promotional expenses in 4QFY17. Dividend of 1.0 sen was announced.

Higher earnings in FY17. Earnings grew 49%yoy in FY17 due to land sales and higher earnings recognition from projects in central region and southern region. Besides, contribution from overseas projects namely Conservatory and Aurora Merlbourne Central and Quintet also contributed to the higher earnings. Meanwhile, unbilled sales increased to RM4.8b in 4QFY17 from RM2.9b in 3QFY17, providing 3.3 year of earnings visibility.

New sales exceeded target in FY17. UEMS recorded new property sales of RM829m in 4QFY17, higher than new sales of RM279m in 3QFY17. New property sales in 4QFY17 were mainly underpinned by sales from Solaris Parq in Dutamas and Mayfair in Melbourne. That lifts total new sales in FY17 to RM1.5b, exceeding management sales target of RM1.2b. UEMS launched projects with GDV of RM2b in FY17. Looking ahead, management is targeting to chalk up new sales of RM1.2b in FY18 on the back of planned launches with GDV of RM1b.

Maintain BUY with unchanged Target Price of RM1.24. We increased our FY18 earnings forecast by 2.2% to factor in the higherthan-expected sales in FY17. We expect the high marketing and promotional expenses to normalize in FY18. Our TP is based on unchanged 40% discount to RNAV. We are maintaining our BUY call on UEMS as its property sales outlook is expected to be supported by its local and oversea projects. Besides, we also like its increasing presence in central region of Malaysia.

Source: MIDF Research - 28 Feb 2018