• Maintain NEUTRAL and MYR0.28 TP, 3% upside. UEM Sunrise’s collaboration with Greystar Real Estate Partners for the Collingwood project allows the former to monetise the land and development with minimal sales and marketing risk. With this transaction, we believe UEMS will be able to hit its MYR1.5bn sales target, as sales from The Minh and The Connaught One (launched in May and June), as well as KMP 7 Kiara Bay (to be launched in 3Q23) will be the key sales drivers in the coming quarters.

• Monetisation of Collingwood project minimises risk of uncertainty. Management hosted a virtual briefing yesterday to further explain the build- to-rent (BTR) project via a fund-through agreement for a development in Collingwood, Australia. We are mildly positive on this collaboration, as it allows UEMS to monetise the land in Collingwood within a short period of time instead of going through the usual development, marketing and selling process. It should also help to free up cash flow for other development opportunities, as CEO Sufian Abdullah indicated that the company will still strive to maintain its presence in the Australian property market.

• New land in Kelana Jaya. After the cancellation of the Semarak land deal in February, UEMS recently acquired nine acres of freehold land adjacent to the Damansara-Puchong Expressway (LDP) in SS6 Kelana Jaya from EPF. The purchase consideration of MYR155m translates to a land cost of around MYR395 psf, which is considered reasonable for that matured area. The land will be developed into a mixed-use development comprising residential and retail components with a GDV of MYR1.1bn.

• Launching The Connaught One this week. This transit-oriented development (GDV: MYR743m) will be launched this week, and should help to drive property sales in 2H23. Management remains confident to achieve its MYR1.5bn sales target by year end, given it has already inked the transaction for the Collingwood project worth MYR881m, in addition to MYR168m property sales in 1Q23.

• No changes in earnings forecasts. The Collingwood deal and the new land in Kelana Jaya have minimal impact to our FY23F-25F earnings. Unbilled sales stood at MYR1.7bn as at 1Q23.

• Maintain TP. After imputing the impact of the Collingwood deal and Kelana Jaya land, our estimated RNAV is just marginally higher. Our TP is based on an unchanged 85% discount to RNAV, and a 2% ESG discount given our score of 2.9 for the company.

Source: RHB Research - 23 Jun 2023