INVESTMENT HIGHLIGHTS

• 1HFY19 earnings largely within expectations

• 1HFY19 earnings lifted by overseas projects

• 2QFY19 new sales at RM316.8m

• Upgrade to Trading Buy with an unchanged TP of RM0.91

1HFY19 earnings largely within expectations. UEM Sunrise Berhad (UEMS) 1HFY19 core net income of RM75.9m is deemed in-line, making up 58% and 41% of our and consensus full year estimates. We have excluded an impairment amounting to RM37.3m from a joint venture as well as forex gain from our CNI. No dividend has been announced.

1HFY19 earnings lifted by overseas projects. UEMS’ core net income (CNI) for the period was higher by 146.1%yoy to RM107.4m as international projects bumped up revenue by 64.9%yoy to RM1.42b. The higher international income contribution has cushioned the lower sales from local projects such as Residensi Astrea and Eugenia-Serene Heights in the central region and Aspira ParkHomes and 680 Avenue in the southern region. These projects are still at early stages of their development cycle. Meanwhile, unbilled sales as of end-June came in at RM2.6b. Aurora Melbourne Central and Conservatory Melbourne contributed 50% to the unbilled sales while Solaris Parq contributed RM443m.

2QFY19 new sales at RM316.8m, which is higher than the new property sales of RM215.2m in 1QFY19. 1HFY19 new sales of RM532m makes up 44% of management’s full year sales target of RM1.2b, which we think should be achievable as the company plans to roll out projects worth close to RM1b in GDV in the coming quarters. Among others, it plans to launch Kepong Metropolitan Plot 5 with a GDV of RM640m in 2HFY19. UEMS has launched projects with GDV of RM249.3m to-date. During the first half, new sales came from Aspira ParkHomes in Gerbang Nusajaya (RM102m), Symphony Hills in Cyberjaya (RM89m), Astrea in Mont Kiara (RM48m), Serene Heights in Bangi (RM48m) and Solaris Parq (RM41m).

Upgrade to Tradng Buy with an unchanged Target Price of RM0.91 (previously Neutral). We maintain our earnings forecast for FY19/20. Our TP is maintained at RM0.91, based on 58% discount to RNAV. At the current share price, the stock is trading at almost 70% discount to its RNAV, which we think is looking more appealing. Price to NTA is 0.46x. Since the share price retracement in April, it has fallen about 32%, we think that there may be some upside from here considering its earnings are still decent while new sales seem to be on track to meet management’s full year target. As such, we believe that this present a trading opportunity for investors.

Source: MIDF Research - 29 Aug 2019