UEMS’  3Q13  results  came  in  above  expectations.  While  management keeps  its  MYR3bn  sales  target  unchanged,  we  believe  full-year  sales could  fall  short  due  to  delays  in  launches  and  unfavourable  market conditions.  Although  UEMS’  valuations  have  become  undemanding after  pricing in  the negative impact of the cooling measures, given the negative sentiment, we maintain our NEUTRAL call and MYR2.73 FV.

• Above  expectations.  UEMS’  3Q13  results  came  in  marginally  above our and market expectations.  The  strong  earnings were  boosted by  the completion  of  the  12.5-acre  land  sale  to  Southern  Marina  (a  70:30  JV company between  the Kuok Brothers Group and Khazanah)  as well as the disposal of the first phase of land to the Ascendas JV. In the property development segment, the key projects that contributed to earnings were East Ledang and Nusa Idaman.
• Maintains  MYR3bn  sales  target  for  2013.  Despite  the  cooling measures, management maintains the MYR3bn sales target for the year. 9M new property  sales amounted to MYR2.1bn (vs  MYR1.7bn in 1H13),mainly driven by Teega, Arcoris in Mont’ Kiara,  East Ledang and Nusa Idaman. Sales from Residensi 22 in Mont’ Kiara (GDV MYR941m for two blocks),  which  has  seen  a  booking  rate  of  70%  for  the  first  block,  are expected to kick in from 4Q13 onwards. In the pipeline, about MYR2.2bn worth of projects are  slated for launch, including Almas (CS-1) in  Puteri Harbour,  which  carries  a  GDV  of  MYR1.4bn.  In  our  view,  the  project could be delayed  due to  slow approval process  and hence, UEMS’ fullyear property sales could fall short of its target.  Going into 2014, given the  challenging  market  environment,  pro duct  launches  will  mainly concentrate on landed properties.
• Forecasts. We raise our FY13 earnings forecast by 7.2% in view of the strong  margin  from  land  sales.  Unbilled  sales  remained  steady  at MYR4.1bn  (vs  MYR4.23bn  in  2Q).  4Q13  earnings  are  expected  to “normalise” as most of the land sales have already been completed (the disposal  of  43.6-acre  land  to  Liberty  Bridge  was  done  in  1Q13).  The property development division will therefore be the key earnings driver.
• Maintain  NEUTRAL.  Although current valuations have largely priced in the impact of the cooling measures, considering the prevailing negative sentiment on the property sector, we maintain our  NEUTRAL  rating on the stock, with an unchanged MYR2.73 FV, at a 25% discount to RNAV.

Financial Exhibits

SWOT Analysis

Company Profile
UEM Sunrise (previously known as UEM Land) is a company under Khazanah Nasional. It is  a developer undertaking developments in Nusajaya Iskandar.

Recommendation Chart

Source: RHB