KEY INVESTMENT HIGHLIGHTS

• Disposing Melbourne property for RM355m

• Positive on the disposal

• Minimal earnings impact

• Maintain Trading Buy with an unchanged TP of RM0.91

Disposing Melbourne property for RM355m. UEM Sunrise (UEMS) announced that it has entered into agreement for the en-bloc disposal its property in Melbourne, Australia for a cash consideration of AUD125m. The property comprises 252 units of serviced apartment forming part of Aurora Melbourne Central together with 10 car park lots and part of the ground floor retail area measuring a gross floor area of 14,900 square meters. The disposal is expected to be completed by 2Q2020.

Positive on the disposal. We are positive on the disposal as the disposal price of RMAUD125m is higher than the disposal price of AUD120m in previous deal which was called off recently. Recall that UEMS had on 13th September 2019 announced that it has mutually terminated the agreement of the en-bloc sales with Ascendas Hospitality Trust due to disagreement on specifications of certain aspects of the serviced apartment component of the Aurora Melbourne Central project. The latest disposal deal enables UEMS to monetise the completed Aurora Melbourne Central project and allows UEMS to pursue further property development opportunities.

Minimal earnings impact. Earnings impact from the proposed disposal is expected to be minimal as we had previously anticipated UEMS to seal another disposal deal within this year. The increase in disposal price of AUD5m is expected to have minimal earnings impact. Hence, we make no changes to our earnings forecasts.

Maintain Trading Buy with an unchanged TP of RM0.91. We maintain our target price for UEMS at RM0.91, based on 58% discount to RNAV. UEMS is trading at 48% discount to its latest NTA of RM1.43 per share, making its valuation looks appealing. Meanwhile, new sales outlook is also stable as new property sales are on track to meet management target. Hence, we maintain our Trading Buy recommendation on UEMS.

Source: MIDF Research - 25 Nov 2019