• Maintain BUY and MYR1.18 TP, 47% upside. UEM Sunrise’s earningsmissed expectations. However, its 9M23 property sales of MYR1.77bnalready surpassed management’s target, as expected. Its net profit for4Q23 should pick up, however, on the completion of a few land disposals.Management has also revised the masterplan for Gerbang Nusajaya, whichnow has a new GDV of MYR42.1bn (subject to approval) while we are stillmaintaining the original figure of MYR29bn in our RNAV estimate, as newcatalytic developments could be driving up land values.

• 3Q23 results. Revenue softened QoQ as the value of land disposals wassmaller compared to the preceding quarter – and this led to a narrower GPMof 27% in 3Q23 (2Q23: 32%). Operating expenses inched up on highermarketing expenses for new launches as well as preparation costs for newprojects in the pipeline. Net gearing remained at 0.46x. Unsold inventorycontinued to fall to MYR135m from MYR146m in the previous quarter. QoQ,earnings were also brought down by lower associate and JV income, whichin turn stemmed from a lack of launches as JV partners are adopting a waitand-see approach, given new catalytic developments in Johor.

• 9M23 sales exceeded management’s target. 3Q23 property sales hitMYR280m vs MYR1.32bn in 2Q23 (driven by the Collingwood project,which is worth MYR873.7m). 9M23 sales of MYR1.77bn already surpassedmanagement’s target of MYR1.5bn. Besides the Australia project, 9M23sales were mainly contributed by The Minh and The Connaught One, whichbrought in MYR368m and MYR148m in sales. Take-up rates for bothprojects (launched in 2Q) reached 36% and 23% (from 25% and 9% in2Q23). We expect UEMS to end the year possibly with MYR1.9bn in sales.

• Launching more projects in Johor in 2024. Given the renewed interestin Iskandar Malaysia, management plans to roll out several new projectsworth >MYR2bn in Gerbang Nusajaya including Puteri Harbour Avenue andnew phases in Aspira Hills and Estuari. Meanwhile, management has alsorevised the masterplan for the 2,334-acre Gerbang Nusajaya, which couldpotentially benefit from the revival of the Kuala Lumpur-Singapore HighSpeed Rail project. Following the amendment, the GDV for GerbangNusajaya may be increased to MYR42.1bn from MYR29bn previously.

• We lower FY23F earnings by 15% in view of UEMS’ weak 3Q earnings.Unbilled sales remained relatively unchanged at MYR2.66bn for thequarter, vs MYR2.67bn in 2Q23.

• Maintain TP. Our TP is based on a 45% discount to RNAV with a 2% ESGdiscount imputed, given our ESG score of 2.9 out of 4 for the company.Upcoming news flow on Iskandar Malaysia should stay favourable as theMoU on the special economic zone is expected to be signed in Jan 2024.

Source: RHB Securities Research - 16 Nov 2023