• Maintain NEUTRAL with lower TP of MYR0.22 from MYR0.33, 5% upside. UEM Sunrise’s earnings beat expectations, given stronger billings from ongoing projects. However, the company may not be able to hit its MYR1.5bn sales target by year end due to the delay in a few project launches given slow approvals from authorities. 9M property sales only achieved MYR736.2m. In view of the rising market risk post-15th general election, we cut our TP to MYR0.22.

• 3Q22 results. Revenue during the quarter was mainly contributed by the billings from ongoing projects, such as Solaris Parq, Aspira ParkHomes, Serene Heights Bangi, Residensi AVA, and inventory sale ie Estuari Gardens. Developed land sale was minimal. Effective tax rate was lower in 3Q22, mainly due to the utilisation of tax losses. Net gearing remained unchanged at 0.51x.

• Decent sales in 3Q22. Property sales reached MYR297.2m vs MYR329m in 2Q22, bringing 9M sales to MYR736.2m. Key contributors include Estuari Gardens (MYR109.4m), Residensi Allevia (MYR111.9m), and KAIA Heights (MYR90.7m). Take-up rate for key projects looks encouraging, with KAIA Heights reaching 62% from 54% in the previous quarter, and Residensi Allevia hitting 68% from 59%. Unsold inventory fell further to MYR227m from MYR276m last quarter.

• Delay in launches to deviate sales target. During the virtual briefing yesterday, management alluded that its MYR1.5bn sales target may no longer hold, given the delay in authorities’ approval for The Minh MK 31 plot 1 (GDV: MYR950m) and Taman Connaught One (GDV: MYR740m). Both projects will now be launched only in 1Q and 2Q next year. Meanwhile, development of Taman Pertama in Cheras is now called off due to compulsory land acquisition. The Collingwood project in Melbourne (GDV: MYR790m) may be put into the market early next year, pending an off-take negotiation. Hence, property sales in 4Q22 are expected to be largely driven by ongoing projects and existing inventory.

• Revision in earnings. In view of the stronger-than-expected 9M earnings, we raise our FY22-24 earnings forecasts by 10-15%. Unbilled sales remained relatively unchanged at MYR2.2bn, vs MYR2.3bn in 2Q22.

• ESG. In view of the unstable political environment which has dampened market sentiment, we raise our discount to RNAV to 90% (from 85%). Our TP also incorporates a 2% ESG discount given our ESG score of 2.90 for the company based on in-house methodology.

Source: RHB Research - 24 Nov 2022