Outlook for UEM Sunrise Bhd remains positive

Outlook for UEM Sunrise Bhd remains positive

PETALING JAYA: The outlook for UEM Sunrise Bhd remains stable premised on its unbilled sales of RM1.8 billion while its FY20–21 earnings will be mainly supported by its completed Australian projects and the new Kiara Bay development, according to AmInvestment Bank.

The completion of the Australian projects has reduced the company’s net gearing to 35% as at Q1’20 from 54% year on year.

AmInvestment Bank said the key growth for UEM Sunrise for FY20 and beyond will be the Kiara Bay project in Kepong.

Situated on a 72.73-acre leasehold land, the first phase of Kiara Bay will be a high-rise residential tower, called Residensi AVA, comprising 870 condominium units with built-ups ranging from 800 sq ft to 1,250 sq ft. The selling price ranges from RM500,000 to RM900,000, with a gross developement value (GDV) of RM656 million.

“We expect the project to be well received given its strategic location along the MRR2 (within 5km from DUKE, NKVE and LDP) and a growing young population in that area,” said AmInvestment Bank.

The research house cut UEM Sunrise’s FY20 net profit forecast by 46% to RM84.5 million to reflect the timing of recognition as a result of the movement control order and the Covid-19 pandemic.

As there is little upside potential, it downgraded UEM Sunrise to ‘hold’ from ‘buy’ with an unchanged fair value of 48 sen.

CGS-CIMB also remained positive on UEM Sunrise due to its attractive valuation and improving balance sheet, despite weaker earnings expected in FY20 due to lumpy revenue recognition of its Australia projects in FY19.

“We deem the results (Q1’20 core loss of RM4 million) in-line as we expect a stronger H2’20 due to revenue recognition from Australian operations,” it said, reiterating its ‘add’ call for UEM Sunrise, with its target price unchanged at 59 sen.

UEM Sunrise is keeping its FY20 sales target of RM2 billion and targeted new project launches at RM2 billion GDV, focusing on mid-market landed residences and reasonably-sized pocket launches in mature locations.

“We view the RM2 billion new sales target as too ambitious despite the positive measures announced under the Short-term Economic Recovery Plan amid an expected GDP contraction and higher unemployment,” said CGS-CIMB.

Meanwhile, PublicInvest Research is neutral on UEM Sunrise’s acquisition of another freehold development site in Melbourne for A$43 million (expected GDV A$250 million).

“We are neutral on this latest land deal. As it had just disposed of a land outright (Mayfair project site) back in Novermber 2019 with pre-sales being very slow, we are puzzled at this decision of buying another development land in Australia.”

PublicInvest adjusted its FY20 estimates for UEM Sunrise downwards by 43% after lowering its margin assumptions and accounting for foreign exchange losses.

“Sales for the quarter were only RM97 million, or only 5% of its FY20 sales target of RM2 billion which is now likely to be revised downwards by management. We maintain our neutral call with an unchanged target price of 55 sen.”

source https://www.thesundaily.my/business/outlook-for-uem-sunrise-bhd-remains-positive-DY2616500