INVESTMENT HIGHLIGHTS

• 1QFY19 earnings deemed within expectations

• Earnings boosted by international projects

• 1QFY19 new sales at RM215.2m

• Earnings forecasts maintained

• Maintain Neutral with an unchanged Target Price of RM0.91

1QFY19 earnings deemed within expectations. UEM Sunrise Berhad (UEMS) 1QFY19 core net income of RM31.5m is deemed within expectations, making up 17% and 11% of our and consensus full year estimates, as we expect stronger earnings from international projects in the coming quarters.

Earnings boosted by international projects. UEMS registered higher core net income of RM31.5m (+62.9%yoy) in line with higher revenue of RM419.3m (+45.7%yoy). The higher earnings were driven by earnings recognition from Conservatory and Aurora Melbourne Central projects in Australia. Besides, earnings were also driven by higher sales from completed products. Looking ahead, we expect earnings in the coming quarters to be stronger as UEMS will be recognising remaining earnings from Aurora Melbourne Central. Meanwhile, unbilled sales declined marginally to RM4.1b in 1QFY19 from RM4.4b in FY18.

1QFY19 new sales at RM215.2m. UEMS recorded new property sales of RM215.2m in 1QFY19, lower than new sales of RM529.5m in 4QFY18. New sales in 1QFY19 up makes up 18% of management new sales target of RM1.2b. Moreover, 45% of total new sales in 1QFY19 were contributed by completed properties, 35% from ongoing projects and remaining 20% from new launches. UEMS launched GDV of RM160m todate and targets to launch projects with total GDV of RM1.1b for the remaining of FY19. Kepong Plot 5 with GDV of RM640m is one of the key projects launches in FY19 which is targeted to be launched in 4QFY19.

Maintain Neutral with an unchanged Target Price of RM0.91. We maintain our earnings forecasts for FY19/20. Our TP is maintained at RM0.91, based on 58% discount to RNAV. We are keeping our Neutral recommendation on UEMS due to limited upside.

Source: MIDF Research - 24 May 2019