• Maintain BUY and MYR1.18 TP, 73% upside. Given the influx ofinvestments, a major landowner like UEM Sunrise will have a competitiveadvantage over its peers. Its huge landbank should enable it to be flexibleenough to carve out some parcels for specific developments (eg industrial)if opportunities arise. The company’s landbank is held at historical cost andit does not have to acquire new land at current market prices. Its recentshare price correction has brought about a good opportunity to re-enter.

• Big names are coming to Johor. The entry of Nvidia and Microsoft pointsto a boost in confidence among foreign investors, especially in the datacentre space. Just over the last one month, apart from the two namesmentioned, Johor has also received investments from two Singapore-baseddata centre operators and facility providers, ST Telemedia Global DataCentres and Yu Ao. Some of the land where their data centres will be setup were sold for record prices (MYR120-125 psf) based on our checks. Notethat general, water and fibre infrastructure works were included in some ofthese transactions.

• Ample flexibility for major landowners. As a major landowner in IskandarMalaysia, UEMS has ample flexibility to develop its 7,632 acres of landthere. While we are unsure if management would explore opportunities inthe data centre segment, having huge parcels of land in Johor would simplymean that the company will be able to convert or re-zone some existingland it owns – probably at remote areas – for industrial developments,without having to compete for and buy new land at current market prices.

• Current market cap implies a land price of only MYR10 psf. Industrialland prices in Johor have risen due to the influx of investments. Of the total7,632 acres of land in Johor, the bulk of UEMS’ landbank is located atGerbang Nusajaya (2,318 acres) along the Second Link Expressway nearthe Tuas link, and Fraser Metropolis in Kulai (2,500 acres, 40% stake).Based on UEMS’ current market cap of MYR3.4bn, this implies a land priceof only MYR10 psf (MYR20 psf, if based on enterprise value), and we havenot taken into account its 589 acres in the central region. We think theupcoming land valuations for the tie-up between Sunway (SWB MK, BUY,TP: MYR2.65) and Equalbase should provide a good benchmark. Bothparties are collaborating to develop the 135-acre Free Commercial Zone forthe logistics industry in Sunway City Iskandar Puteri.

• More to come. We view the recent correction in UEMS’ share price as agood opportunity for investors to re-enter positions to accumulate the stock.This inflow of investments may be just the beginning, and Prime MinisterDato’ Seri Anwar Ibrahim’s recent visit to the US should bear some fruit.According to media reports, our PM met with the heads of some technologygiants like Google, Enovix Corp, Microsoft and Tik Tok in San Francisco.

Source: RHB Securities Research - 11 Dec 2023