KEY INVESTMENT HIGHLIGHTS

• 9MFY20 earnings below expectation

• Weak earnings

• 9MFY20 new property sales at RM373.9m

• Earnings estimates revised downwards

• Maintain NEUTRAL with a revised TP of RM0.38

9MFY20 earnings below expectation. UEM Sunrise results came in below expectation as it registered core net loss of RM92.6m in 9MFY20. The negative deviation could be mainly attributable to the slower than expected progress billing. Note that we have mainly excluded inventories write down of RM39.5m in our core net income calculations.

Weak earnings. UEM Sunrise core net loss in 3QFY20 narrowed to RM31.8m from core net loss of RM57.4m in 2QFY20 as construction works at project sites resumed after being halted during Movement Control Order (MCO) in 2QFY20. That brought cumulative core net loss to RM92.6m in 9MFY20 against core net profit of RM133.9m in 9MFY19. The dismal earnings were mainly due to slow progress billing of projects, lower contribution from international projects and lower sales achieved. Looking forward, 4QFY20 earnings are expected to boost by earnings recognition from en-bloc disposal in Aurora Melbourne Central with total value of AUD125m. Meanwhile, unbilled sales were flattish at RM1.69b in 3QFY20 against unbilled sales of RM1.7b in 2QFY20.

9MFY20 new property sales at RM373.9m. UEM Sunrise registered higher new sales of RM223m in 3QFY20 as compared to new sales of RM53.5m in 2QFY20. That led total new sales to RM373.9m in 9MFY20 which was lower than new sales of RM720.4m in 9MFY19 as sales were affected by MCO and absence of new launches. Looking ahead, management is maintaining new sales target of RM1b for FY20 as sales are expected to be supported by new launches and land sales of RM434m in Iskandar Puteri to AME Elite Consortium Berhad.

Maintain NEUTRAL with a revised TP of RM0.38. We revise our FY20/21F earnings forecasts by -81.4%/-19.1% to reflect the slower progress billing of projects. We also revise our TP for UEM Sunrise to RM0.38 from RM0.42 as we widen our RNAV discount to 82% from 80%. We see limited catalyst to UEMS Sunrise as new sales outlook is expected to be weighed by re-imposition of CMCO in Malaysia. Hence, we maintain our Neutral call on UEM Sunrise.

Source: MIDF Research - 25 Nov 2020