While UEMS’ sales targets and key KPIs are ambitious, we remain cautious, especially on Iskandar Malaysia’s market outlook. MaintainNEUTRAL and MYR1.42 TP (8% upside). During the briefing, management shared some key headline numbers: i) MYR3.7bn product launches, ii) new MYR2bn sales target, iii) flat revenue growth, and iv) MYR500m-550m net profit target for 2015.
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Briefing highlights. UEM Sunrise (UEMS) hosted a briefing to introduce new CEO Encik Anwar Syahrin Abdul Ajib. En Anwar shared with us some key headline numbers. Its new MYR2bn sales target comprises MYR700m from Iskandar Malaysia, MYR300m from land sales and MYR1bn from overseas. W e think the MYR700m target seems rather ambitious, given that UEMS only made MYR260m in sales from the region in FY14. Its earnings target is also higher than our estimates. Yet, we maintain our numbers, as unbilled sales of about MYR2.5bn for local projects are expected to come off and earnings recognition for the Aurora project in Melbourne is over four stages, based on the completion method. Also, there were not many launches in 1Q15.
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Key product launches in FY15. Among UEMS’ projects, we are more upbeat on the land sale in Southern Industrial & Logistics Clusters Phase3 (SiLC 3) as demand for industrial land plots in a well-organised industrial zone should be stable. It has a GDV of MYR600m. Other launches include the Estuari superlink homes (GDV: MYR533m), Sefina Mont’ Kiara (GDV: MYR311m) and Serene Heights @ Bangi (GDV: MYR181m).
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Key strategies. Given UEMS’ over 70% landbank exposure in the weak Iskandar Malaysia market, management said it will focus more on product quality, and embark on property-related expansion/strengthening asset base. About MYR1bn will be allocated annually for landbanking, targeting the Klang Valley and Northern regions, as well as the overseas market.
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Maintain NEUTRAL and MYR1.42 TP. Re-rating catalysts are lacking. Sentiment on the Iskandar Malaysia market should remain weak over the next 6-12 months due to massive oversupply concerns. Our TP is kept at MYR1.42, which is based on an unchanged 55% discount to RNAV. Maintain NEUTRAL.
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