UEMS’  4Q13  results  came  in  within  expectations.  FY13  new  sales  hit management’s  target  of  MYR3bn,  and  a  new  target  of  MYR3.2bn  has been set for FY14.  Four months after the announcement of the Budget 2014, we believe sentiment and property demand will gradually recover from 2Q onwards  after the trough in 4Q13-1Q14.  We  therefore upgrade UEMS to Trading BUY while maintain our MYR2.73 FV.

• Within  expectations.  UEMS’  4Q13  results  came  in  within  our  and market expectations.  4Q earnings were weaker q-o-q, due to the lack of land sales.  Operating expenses were higher during the quarter, largely due  to  the  accruals  for  legal  fees  and  loan  documentation  charges incurred  in  the Teega project.  Meanwhile, headline net profit was lifted by the recognition of deferred tax assets. A 4 sen dividend was declared.
• FY13 new sales hit MYR3bn; new MYR3.2bn  target  for FY14.  FY13 new sales achieved MYR3bn,  up from MYR2.1bn in 9MFY13. The bulk of the sales came from Residensi 22 (MYR400m), Teega (MYR170m), East Ledang (MYR100m) and Arcoris (MYR100m), as buyers rushed to sign  SPA  before  the  lapse  of  the  DIBS  (developers’  interest  bearing scheme)  offer.  Management has set a decent sales target of MYR3.2bn for FY14, on the back of MYR3.8bn worth of new launches.
• Dato’  Wan  resigned.  Dato’ Wan  Abdullah,  the  former  CEO  of  UEMS, has announced his resignation  due to health concerns, and meanwhile,his employment contract has been transferred to UEM Group.  While the board  has  formed  a  committee  to  look  for  a  new  candidate,  Dato’ Izzaddin, the executive director, will continue to be the acting CEO for the time being.
• Forecasts.  The  management  has  released  three  KPIs  for  FY14:  25% and  10%  growth  for  revenue  and  PATAMI,  and  10%  ROE.  While  we believe the 25% revenue growth projection could appear aggressive, our forecast is in line  with  the targeted  growth,  underpinned  by  MYR4.1bn unbilled sales.
• Upgrade to Trading BUY. While we retain our FV at MYR2.73 at a 25% discount to RNAV, we upgrade UEMS to Trading BUY (from Neutral), as we  believe  the  current  valuations  have  largely  priced  in  the  negative impact  of the cooling measures. The stock is not a Buy as  fundamentals of  the  Iskandar  market  will  take  some  time  to  strengthen.  Positive catalysts could come from the announcement of the high speed rail.

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Company Profile
UEM Sunrise (previously known as UEM Land)  is a company under Khazanah Nasional. It is the devel oper undertaking developments in Nusajaya Iskandar.

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Source: RHB