UEM Sunrise 1HFY17 performance commendable

UEM Sunrise Bhd (Aug 24, RM1.16)

Maintain hold with an unchanged fair value of RM1.25: UEM Sunrise Bhd’s first half of financial year 2017 (1HFY17) net earnings soared 170.2% year-on-year (y-o-y) to RM155.8 million. This made up 70% of our full-year forecasts and 66% of consensus. We deem this to be in line, as we expect a weaker performance in the upcoming quarters. No dividend was declared, as expected.

The positive performance was contributed by an improvement in the property development segment and higher land sales. Property development revenue increased 50% y-o-y in 1HFY17 to RM968.1 million, mainly due to revenue contribution from Residensi 22, its Mont’Kiara development, the completion of Teega and its Puteri Harbour project, as well as its Melbourne projects, namely Aurora and Conservatory.

UEM Sunrise also registered a 333% y-o-y jump to RM418.2 million in revenue from land sales in 1HFY17. This was mainly due to its disposal of the Alderbridge land in Canada (4.9 acres [1.98ha]) for C$113 million (RM371 million) in 2QFY17.

New property sales dropped 8.3% y-o-y to RM391.7 million in 1HFY17. This was mainly attributed to the lower sales in its international projects, which fell 49% y-o-y to RM88.5 million. However, property sales for its domestic projects registered growth, with new sales in Johor expanding 78% y-o-y to RM66.6 million, contributed mainly by its Estuari, Puteri Harbour project (RM51.7 million in new sales). UEM Sunrise’s new sales for the Klang Valley also registered strong growth, climbing 19% y-o-y to RM124.2 million, contributed mainly by its Symphony Hills development in Cyberjaya, which chalked up RM37.5 million in new sales in 1HFY17.

UEM Sunrise’s earnings transparency remains positive with a healthy RM4.7 billion in unbilled sales at end-1HFY17 (end-1QFY17: RM5 billion).

Management reiterates its new property sales target of RM1.2 billion for FY17, underpinned by RM1.7 billion of new launches slated for FY17. We believe the sales target is still achievable, given that most of the launches will take place in 2HFY17. The group launched its Dahlia@Serene Heights Bangi (gross development value [GDV]: RM58.5 million) in mid-July 2017. It is also launching Solaris Parq Residences, Dutamas (GDV: RM370.5 million), Serimbun, Bukit Indah (GDV: RM142.1 million) and Mayfair, St Kilda, Melbourne (GDV: RM1.1 billion), its third project in Australia, this year. — AmInvestment Bank, Aug 24

This article first appeared in The Edge Financial Daily, on Aug 25, 2017.

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