KEY INVESTMENT HIGHLIGHTS

• 9MFY19 earnings within our expectation

• Earnings boosted by international projects

• 9MFY19 new property sales at RM720m

• Earnings estimates maintained

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

9MFY19 earnings within our expectation. UEM Sunrise (UEMS) 9MFY19 core net income of RM133.9m came in within our but below consensus expectations, making up 72% and 54% of full year estimates respectively. Note that we have excluded impairment amounting to RM37.3m from a joint venture, land sales again as well as forex loss in our core net income calculations.

Earnings boosted by international projects. UEMS recorded core net income of RM26.5m (+61.3%yoy) in 3QFY19, bringing cumulative core net income to RM133.9m (+139%yoy) in 9MFY19. The surge in income was mainly attributed to earnings recognition of international projects being Aurora Melbourne Central and Conservatory. Meanwhile, higher construction progress of domestic projects in 3QFY19 also helped in earnings growth. On another hand, unbilled sales as 3QFY19 eased marginally to RM2.4b from RM2.6b in 2QFY19, providing earnings visibility of 1.2 years.

9MFY19 new property sales at RM720m. UEMS recorded new property sales of RM188m in 3QFY19, bringing cumulative new property sales to RM720m in 9MFY19. New sales in 9MFY19 made up 60% of management sales target of RM1.2b. Nevertheless, new sales in 4QFY19 are expected to be driven by planned launches with total GDV of RM890m. Residensi AVA in Kiara Bay is the key launch in 4QFY19 with total GDV of RM656m.

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 RM1.45 per share, making its valuation looks appealing. Hence, we maintain our Trading Buy recommendation on UEMS.

Source: MIDF Research - 27 Nov 2019