PROPERTY

UEM SUNRISE
(UEMS MK EQUITY, ULHB.KL) 15 Oct 2019

Kiara Bay is key highlight for FY20 & beyond

Company report BUY
Thong Pak Leng (Maintained)
thong-pak-leng@ambankgroup.com
03-2036 2025 Rationale for report: Company update

Investment Highlights
Price RM0.67
Fair Value RM0.80
52-week High/Low RM1.02/RM0.62
 We maintain our BUY recommendation on UEM Sunrise
(UEMS) with a lower fair value of RM0.80 (from RM0.81) based
Key Changes on a discount of 45% to its RNAV (Exhibit 1). We cut our
Fair value  FY19–21 earnings forecasts by 12%, 15% and 16%
EPS  respectively to reflect the timing of recognition.

YE to Dec FY18 FY19F FY20F FY21F  During a recent meeting, management updated us on its
latest development. UEMS’ new high-rise township project in
Revenue (RM mil) 2,044.0 2,080.1 2,143.5 2,115.2 Kepong, namely Kiara Bay, will be the key highlight for FY20
Core net profit (RM mil) 318.1 233.1 179.0 170.7 and beyond. Situated on a 72.73-acre of leasehold land via a
FD Core EPS (sen) 7.0 5.1 3.9 3.8 50:50 JV with Mega Legacy Equity SB, the project is adjacent
FD Core EPS growth (%) 201.3 (26.7) (23.2) (4.6) to Kepong Metropolitan Park. The JV plans to develop a
Consensus Net Profit (RM mil) - 246.8 187.2 174.4 mixed residential and commercial development with an
DPS (sen) 1.0 1.0 1.0 1.0 estimated GDV of RM15bil over a 15-year period.
PE (x) 9.6 13.0 17.0 17.8
EV/EBITDA (x) 12.3 12.8 16.4 15.6  Management is targeting Kiara Bay’s maiden launch in late
Div yield (%) 1.7 1.7 1.7 1.7 4QFY19, featuring two towers of serviced residences (870
ROE (%) 4.5 3.2 2.4 2.3 units) priced between RM500K and RM900K per unit with an
Net Gearing (%) 50.8% 38.7% 36.9% 32.1% estimated GDV of RM656mil. We expect the project to be well-
received given its strategic location along the MRR2 (within
Stock and Financial Data 5km from DUKE, NKVE and LDP) and a growing young
population in that area.
Shares Outstanding (million) 4,537.4
Market Cap (RM mil) 3,040.1  Meanwhile in Australia, the SP4, SP5 and Ascendas bloc
Book Value (RM/share) 1.58 (remaining GDV A$638.7mil) of Aurora Melbourne Central are
P/BV (x) 0.4 completed with full settlement by the end of 2019. In
ROE (%) 1.6 September 2019, UEMS and A-HTrust mutually terminated the
Net Gearing (%) 50.8% contract of selling the 252 units of serviced apartment
(Ascendas bloc) within its Aurora Melbourne Central to A-
Major Shareholders Khazanah Nasional 66.1% HTrust at A$120mil following the disagreement on
Urusharta Jamaah 7.7% specifications of certain aspects relating to the property. The
EPF 5.1% mutual termination will allow UEMS to seek and explore other
Free Float 21.1% opportunities that are more beneficial to the group. UEMS is
Avg Daily Value (RM mil) 0.72 currently evaluating the proposals with a target to conclude
the sale transaction at more than A$120mil. Management
Price performance 3mth 6mth 12mth
noted the deal to be completed by the end of the year, hence
Absolute (%) (17.0) (18.5) (8.7) expects revenue to be recognized in 4QFY19.
Relative (%) 2.9 (10.4) 4.0  The handing over of the Australian projects will also reduce
the company’s net gearing from 50% to below 40% by the end
1.40 1,900 of FY19. Beyond that, we believe the outlook for UEMS
1.30 1,850 remains stable premised on its unbilled sales of local projects
1.20 1,800 amounting to RM947mil which will provide earnings visibility
1.10 1,750 for FY20. Furthermore, UEMS is in talks with several parties to
1.00 1,700 dispose of sizeable amount of its landbank to unlock cash.
0.90 1,650
 The sales of local properties in general are still slower than
0.80 1,600 expected. Hence we cut our FY19, FY20 and FY21 earnings
0.70 1,550 forecast by 12%, 15% and 16% respectively to reflect the
0.60 1,500 timing of recognition. Our fair value is reduced to RM0.80
Sep-15
Dec-15

Jun-16
Sep-16
Dec-16

Jun-17
Sep-17
Dec-17

Jun-18
Sep-18
Dec-18

Jun-19
Sep-19
Mar-16

Mar-17

Mar-18

Mar-19

(from RM0.81) based on a discount of 45% to its RNAV.

Nonetheless, at current price, the stock still offers a potential
UEMS MK Equity FBMKLCI Index upside of close to 20%. Therefore, we maintain our BUY
recommendation on UEMS.
UEM Sunrise 15 Oct 2019

 UEMS is keeping its GDV target of RM1.2bil for 2019. Year to date, UEMS has launched projects with GDV worth
over RM318mil locally. Aspira ParkHomes (phases 1 & 2) in the southern region, which were launched in January
and June respectively, saw take-up rates of more than 70% and 50% respectively while the recent Aspira Square
(commercial) in August has recorded take-up rates of more than 50%. In the central region, over 40% of the units in
Dahlia Phase 2 in Serene Heights, Bangi have been sold since its launch in May 2019. The remaining RM880mil,
including the RM656mil Kiara Bay project is targeted to be launched by 4Q19.

EXHIBIT 1: RNAV CALCULATIONS

Est. mkt
Outstanding NPV @15% Outstanding NPV @15% Land size Surplus
DEVELOPMENT PROPERTIES Stake JV PROJECTS - ON-GOING Stake value
GDV (RMmil) (RMmil) GDV (RMmil) (RMmil) (acres) (RM mil)
(RM psf)
Southern Region Southern Region Undeveloped landbank
East Ledang 2,309.4 85.6 100% Mall of Medini 2,097.0 76.9 55% Iskandar Puteri 507.1 35.0 193.3
N usa Idaman 933.3 42.3 100% Horizon Hills 2,710.7 90.4 50% Klang Valley 26.2 350.0 99.9
N usa Bayu 415.4 20.2 100% Emerald Bay, Puteri Harbour 3,177.0 84.8 40% Mersing 431.0 6.0 28.2
Almas, Puteri Harbour 1,380.2 55.5 100% Nusajaya Tech Park, Gerbang Nusajaya 3,185.0 85.0 40% Tapah 2,405.0 3.5 91.7
Estuari, Puteri H arbour 5,890.3 97.9 100% Total 413.0
Melia Residences, Gerbang N usajaya 304.4 15.0 100% Central
Radia Bukit Jelutong 1,038.9 34.6 50% Catalyst development
Central Region Seremban Forest H eights, Seremban 1,809.1 60.2 50% Puteri H arbour 207.2 40.0 90.3
Serene H eights Bangi 3,118.1 92.6 100% SiLC (Phase 3) 189.4 40.0 82.5
MK 20 Arcoris, Mont'Kiara 439.0 23.1 100% JV PROJECTS - PIPELINE Afiat H ealthpark 31.0 40.0 13.5
Solaris Parq, Dutamas 2,183.2 78.8 100% Southern Sireh Park, Iskandar Puteri 273.0 40.0 118.9
Residential South, Puteri Harbour 2,827.4 136.3 80% Total 305.2
PIPELINE PROJECTS The Waves (C S3) - Puteri H arbour 1,201.0 36.2 50%
Southern Region Gerbang Nusajaya - Mulpha JV (U EMS Land) 2,771.0 83.5 50%
Gerbang Nusajaya 25,682.1 234.4 100% Gerbang Nusajaya - Mulpha JV (Mulpha Land) 2,586.3 77.9 50%
Laman N usantara, Gerbang Nusajaya 485.2 10.1 100% Gerbang Nusajaya - KLK 5,000.0 120.6 40% SUMMARY NAV (RM mil)
Iris Residences, Gerbang Nusajaya 294.9 6.1 100% Gerbang Nusajaya - Fastrackcity 3,700.0 66.9 30% Development Projects 1,402.2
Fraser Metropolis, Kulai 15,000.0 542.5 60% JV Projects 2,297.9
Central Region Desaru 10,460.0 321.6 51% Undeveloped landbank 413.0
Artisan Hills, Kajang 1,485.9 38.7 100% Unbilled sales 220.0
Equine Land, Sri Kembangan 291.0 7.6 100% Central Catalyst development 305.2
Angkasa Raya 1,903.6 49.6 100% Kepong 15,000.0 480.5 50% 4,638.2
MC OBA Land, Jalan Syed Putra 843.4 22.0 100% NTA 6,469.0
MK 31, Mont'Kiara 1,483.5 38.7 100% Total 2,297.9 Total RNAV 7,502.3
MK 27, Mont'Kiara 326.0 8.5 100% 45% discount to RNAV 4,126.0
FD no of shares (mil) 5,160.0
International Fair value per share (RM) 0.80
Durban, South Africa 1,631.9 47.6 100%
Aurora C entral M elbourne 2,389.6 226.6 100%
C oservatory Melbourne 990.6 94.0 100%
Mayfair Melbourne 1,132.6 107.4 100%

Total 1,402.2

Source: AmInvestment Bank Bhd

AmInvestment Bank Bhd 2

UEM Sunrise 15 Oct 2019

EXHIBIT 2: FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec) FY17 FY18 FY19F FY20F FY21F

Revenue 1,860.6 2,044.0 2,080.1 2,143.5 2,115.2

EBITDA 274.4 540.7 456.3 352.0 349.2
Depreciation/Amortisation (25.2) (27.0) (27.5) (28.3) (27.9)
Operating income (EBIT) 249.2 513.7 428.8 323.7 321.3
Other income & associates 36.1 41.4 33.3 58.3 46.6
Net interest (91.1) (101.0) (102.8) (105.9) (104.5)
Exceptional items 0.0 (37.8) 0.0 0.0 0.0
Pretax profit 194.1 416.4 359.3 276.1 263.4
Taxation (87.1) (135.6) (125.8) (96.7) (92.2)
Minority interests (1.5) (0.5) (0.5) (0.5) (0.5)
Net profit 105.6 280.3 233.1 179.0 170.7
Core net profit 105.6 318.1 233.1 179.0 170.7

Balance Sheet (RMmil, YE 31 Dec) FY17 FY18 FY19F FY20F FY21F

PPE 377.1 464.9 488.1 512.5 538.1

Intangible assets 621.4 621.4 621.4 621.4 621.4
Other long-term assets 6,040.5 7,659.9 7,859.9 7,659.9 7,453.9
Total non-current assets 7,039.0 8,746.2 8,969.5 8,793.9 8,613.5
Cash & equivalent 808.0 1,078.6 800.6 815.3 829.1
Inventories 609.7 695.3 430.8 479.2 472.9
Trade receivables 2,640.5 1,044.0 1,082.8 1,105.3 1,095.9
Other current assets 3,300.2 2,550.7 1,836.6 2,045.7 2,028.7
Total current assets 7,358.4 5,368.6 4,150.8 4,445.5 4,426.6
Trade payables 888.6 757.4 646.3 718.8 806.2
Short-term borrowings 1,485.5 2,288.7 2,037.9 2,075.3 2,110.4
Other current liabilities 495.5 426.7 427.6 429.1 428.4
Total current liabilities 2,869.6 3,472.8 3,111.7 3,223.2 3,345.0
Long-term borrowings 2,734.2 2,394.8 1,582.7 1,477.0 1,137.0
Other long-term liabilities 1,361.4 793.1 777.6 746.1 644.5
Total long-term liabilities 4,095.6 3,187.9 2,360.3 2,223.1 1,781.5
Shareholders’ funds 7,069.0 7,090.4 7,278.1 7,411.7 7,537.1
Minority interests 363.1 363.7 370.2 381.4 376.4
BV/share (RM) 1.56 1.56 1.60 1.63 1.66

Cash Flow (RMmil, YE 31 Dec) FY17 FY18 FY19F FY20F FY21F

Pretax profit 194.1 416.4 359.3 276.1 263.4

Depreciation/Amortisation 25.2 27.0 27.5 28.3 27.9
Net change in working capital (1,400.0) 2,060.3 829.5 (205.9) 119.5
Others 1,024.6 (2,369.0) (161.1) (145.8) (227.2)
Cash flow from operations (156.1) 134.7 1,055.2 (47.3) 183.7
Capital expenditure (81.7) (60.7) (23.2) (24.4) (25.6)
Net investments & sale of fixed assets (20.0) 0.0 0.0 0.0 0.0
Others (70.2) (66.0) (200.0) 200.0 206.0
Cash flow from investing (171.9) (126.7) (223.2) 175.6 180.4
Debt raised/(repaid) 543.8 535.3 (1,063.0) (68.3) (304.9)
Equity raised/(repaid) 0.0 0.0 0.0 0.0 0.0
Dividends paid 0.0 (53.3) (45.4) (45.4) (45.4)
Others (177.2) (194.8) 0.0 0.0 0.0
Cash flow from financing 366.7 287.2 (1,108.3) (113.6) (350.3)
Net cash flow 38.7 295.2 (276.3) 14.7 13.8
Adjustments (21.5) (23.9) 0.0 0.0 0.0
Net cash/(debt) b/f 788.5 805.7 1,076.9 800.6 815.3
Net cash/(debt) c/f 805.7 1,076.9 800.6 815.3 829.1

Key Ratios (YE31 Dec) FY17 FY18 FY19F FY20F FY21F

Revenue growth (%) 1.0 9.9 1.8 3.0 (1.3)

EBITDA growth (%) 12.6 97.0 (15.6) (22.8) (0.8)
Pretax margin (%) 10.4 20.4 17.3 12.9 12.5
Net profit margin (%) 5.7 13.7 11.2 8.4 8.1
Interest cover (x) 2.7 5.1 4.2 3.1 3.1
Effective tax rate (%) 44.8 32.6 35.0 35.0 35.0
Dividend payout (%) 43.0 16.2 19.5 25.4 26.6
Receivable turnover (days) 518.0 186.4 190.0 188.2 189.1
Inventory turnover (days) 117.2 116.5 98.8 77.5 82.1
Payable turnover (days) 164.1 147.0 123.1 116.2 131.6

Source: AmInvestment Bank Bhd estimates

AmInvestment Bank Bhd 3

UEM Sunrise 15 Oct 2019

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AmInvestment Bank Bhd 4