INVESTMENT HIGHLIGHTS

• Plan for KL high rise project scrapped

• JLDA signed in 2016

• Neutral on the news

• Earnings forecast maintained

• Maintain BUY with unchanged Target Price of RM1.25

Plan for KL high rise project scrapped. UEM Sunrise announced that joint land development agreement (JLDA) between UEM Sunrise, TM Berhad and Sunrise Quality Sdn Bhd (an indirect wholly-owned subsidiary of UEM Sunrise) for the development of TM’s 1.69-acre land in Jalan Raja Chulan has been rescinded subsequent to the nonfulfilment of the conditions precedent. Both parties have also agreed to refund the deposit to Sunrise Quality Sdn Bhd.

JLDA signed in 2016. To recap, UEM Sunrise, TM and Sunrise Quality Sdn Bhd entered into the JLDA on 27th May 2016 for the development of the land. The plan is to build a high rise mixed development comprising serviced apartments and retail elements. Under the agreement, Sunrise Quality Sdn Bhd would pay TM a guaranteed land cost of RM150mil as well as a 5% share of the gross development value of the project.

Neutral on the news. We are neutral on the announcement as the announcement is not expected to impact earnings of UEM Sunrise. We have not factored in the earnings contribution from the proposed project on the land as we had previously gathered that UEM Sunrise still needs between 1 to 2 years to get the necessary approvals before the project to go ahead. Hence, we make no changes to our earnings forecast for FY18/19.

Maintain BUY with unchanged Target Price of RM1.25. Our TP is based on 45% discount to RNAV. We maintain our BUY recommendation on UEM Sunrise as valuation of UEMS is attractive, trading at 33% discount to NTA. We also like strategy of UEMS of increasing presence in Central region of Malaysia.

Source: MIDF Research - 27 Aug 2018