UEM Sunrise on track to achieve FY15 sales target

UEM Sunrise Bhd (Dec 4, RM1.11)

Maintain neutral with a higher target price (TP) of RM1.11: UEM Sunrise Bhd has signed an agreement with Ascendas Hospitality Trust to sell the serviced apartment component of the La Trobe Street mixed-use development, Aurora Melbourne Central, for A$120 million (RM369 million).

The serviced apartment component sold include 252 units from level 10 to level 32 of Aurora Melbourne Central, common facilities for guests located on level 9, and a restaurant located on the ground floor. Profit from the sale amounted to A$27 million, but recognition will only be in financial year 2019 (FY19) as projects in Australia are recognised upon completion.

Note that the A$120 million gross development value (GDV) from serviced apartments forms part of the total GDV of A$770 million for Aurora Melbourne Central.

We gather that for the other A$550 million GDV, which consists of 941 residential apartments, UEM Sunrise has achieved a take-up rate of 98% (already included in our FY15 ending Dec 31 and historical sales). The remaining A$100 million of GDV (retail and offices) is likely to be launched in FY16 or FY17.

We are positive on the news as UEM Sunrise will be able to focus its resources on marketing and selling its other Melbourne projects. Note that managing serviced apartments is not UEM Sunrise’s core business.

As UEM Sunrise has achieved sales of RM1.18 billion in the nine months ended Sept 30 (9MFY15), cumulative sales (including the sale of serviced apartments for RM371 million) will be RM1.56 billion.

This makes up 80%/78% of our/management sales target of RM1.95 billion/RM2 billion for FY15. Hence, we believe that UEM Sunrise is on track to achieve its full-year sales target. — MIDF Research, Dec 4

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This article first appeared in The Edge Financial Daily, on Dec 7, 2015. Subscribe to The Edge Financial Daily here.