UEM Sunrise sees earnings boost

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Petaling Jaya: UEM Sunrise Bhd is expected to get an earnings boost this year following the sale of three parcels of land in Canada.

Maybank Investment Bank Research (Maybank IB) said in a report yesterday it had raised the company’s 2017 net profit forecast by 44% after factoring the land sale gain in Canada.

The research house also said it had marginally tweaked its 2018 and 2019 forecasts by 0.6% and 0.4% respectively.

“Consequently, our realised net asset value (RNAV) is marginally raised by two sen to RM2.85. Post land sale, UEM Sunrise’s proforma net gearing is estimated at 0.45 times.

 “We currently value UEM Sunrise based on a 60% discount to our estimated RNAV. The steep discount is to reflect its large exposure to Iskandar Malaysia.”

Maybank IB said the proceeds from the land sale will be deployed for working capital over the next twelve months.

“We are not surprised by the land sale as UEM Sunrise had indicated earlier its intention to focus on its Malaysian project and switch its international business focus to Australia, where the company currently has three projects.”

PublicInvest Research said the land disposal was expected to generate a net profit of RM72mil upon the completion of the deal, which is expected by the third quarter of 2017.

“Our earnings estimates are kept unchanged for now pending the completion of the deal,” it said.

MIDF Research said it expected the company’s earnings estimate this year to be increased by 43% to RM240mil.

“The land disposal allows UEM Sunrise’s management to shift its international business focus to Australia. Note that the company has two ongoing projects in Melbourne (Aurora Central and Conservatory) with a third project currently in the pipeline (St. Kilda).

“We are positive on this as we believe that UEM Sunrise’s management focus on the Australia market should result in more stable sales achievement and margin due to its experience in Melbourne market.”

The research house is maintaining a “neutral” call on the stock, with a higher target price of RM1.04.

“The deal has increased our fully diluted RNAV slightly and hence our overall target price is also increased to RM1.04 (from RM1.03).

“Valuation methodology is unchanged based on 50% discount to RNAV.

“Despite the positive news from the land sale, we maintain our neutral call on the stock due to unexciting property market outlook in Johor.”

On Monday, UEM Sunrise said its unit UEM Sunrise (Canada) Alderbridge Ltd was selling three parcels of land in New Westminister, Richmond, BC to South Street Development Group’s unit 1107782 BC Ltd.

The company said the purchase consideration reflected the prevailing market prices of similar properties in the vicinity.

It explained the sale was to focus on Australia where the UEM Sunrise Group has two ongoing projects and a third project currently in the pipeline.

News Source:(Star Property)

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