• Maintain BUY and MYR1.60 TP, 36% upside. We are upbeat with UEM Sunrise’s partnership with ITRAMAS Corp (ITRAMAS) and China Machinery Engineering Corporation (CMEC) to develop the first renewable energy (RE) industrial park in Johor. We think the partnership is strong given the profile and businesses of ITRAMAS and CMEC. The RE industrial park development is one of the catalytic projects under Malaysia’s National Energy Transition Roadmap (NETR). More importantly, this initiative is meaningful as it should result in greater job opportunities and commercial activities in Nusajaya.

• Background. Recall in Jul 2023, UEM Group, ITRAMAS and CMEC Wuxi, along with Blueleaf Energy and HEXA Renewables announced their collaboration to develop a 1GW hybrid solar power plant project, and yesterday’s MoU for the RE industrial park is part of it.

• Joining hands with ITRAMAS and CMEC. 40 acres of land in Gerbang Nusajaya has been earmarked for this RE industrial park development. ITRAMAS is experienced in green technology, while CMEC is a state-owned enterprise, with core businesses in renewable energy, photovoltaic or PV cell, and high-end machinery manufacturing, specialising in the construction of power projects in generation, transmission and distribution. As such, the RE industrial park targets to attract Chinese manufacturers and suppliers across the RE and EV value chains, as well as high-tech R&D companies to establish their operations in the park. It was also mentioned that the industrial park will feature a RE hub, housing a cutting-edge solar module factory and advanced research facilities.

• Details on the collaboration to be ironed out. We believe that details of this partnership will be announced in the coming months, including the equity participation, value of investments and GDV for the RE industrial park. It was also mentioned that this 40-acre land is expected to have 730k sqf GFA of factories. We make no changes in our earnings forecasts for now.

• RE industrial park to bring in more manufacturing investments. Unlike a typical data centre investment which does not need as many skilled labours, we think this RE industrial park is going to be the key manufacturing cluster for RE and EV parts in Iskandar Malaysia, and possibly, the region. Meanwhile, Malaysia has also been benefiting from the US-China trade tensions and China + 1 strategy, as Johor and Penang have been seeing rising foreign direct investments in recent years. We understand that this 40-acre land is ready for development with the basic infrastructure in place. Potential new job opportunities and inflow of expats should create a natural demand for properties there.

• ESG. Our TP includes a 2% ESG discount based on UEMS’ ESG score of 2.9.

Source: RHB Research - 17 May 2024