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UEM Sunrise: Expanding Footprint Around The World (Part 2)
By: Brian Brinker
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By: Ong Qiuying
Articles (131) Profile

As seen from how developments in the Malaysia property market might be a boost to the industry, we now take a closer look into UEM Sunrise’s developments that could ride on the positive.

Financial Highlights
UEM Sunrise enjoyed strong revenue growth in FY13, with revenue expanding from RM1.9 billion in FY12 to RM2.4 billion in FY13.

In FY09, the company’s revenues were only RM346.3 million, so the group has certainly enjoyed a productive few years.

Before tax and zakat profits have also been expanding at a rapid pace. In FY09, the company pulled in only RM127.4 million. By FY12, profits had expanded to RM534.7 million and by FY13, it had reached RM686.3 million.

The company has RM1.4 billion held in deposits, cash, and bank balances versus RM1.9 billion in borrowings, a healthy ratio for a major real estate developer.

Approximately 40 percent of the company’s RM9.8 billion worth of assets are currently held in land and property developments.

    Latest Developments

  • UEM Sunrise is optimistic on its property development projects in Australia with two recently acquired parcels of land, which the company is in the midst of finalising the building’s plan. It will also launch two projects in Melbourne worth a combined A$1 billion (RM3 billion) by end-2014.
  • Company recently launched Block B of its Residensi 22 in Mont Kiara and is aiming for a 70 percent take-up rate. Block A enjoyed a 100 percent take-up rate. The Residensi 22 development has a gross development value (GDV) of about RM971 million, and Block B has an indicative selling price of RM750 per square feet.
  • The company is planning to launch several new projects in Indonesia, which is currently a hot real estate market and will target luxury developments.
  • UEM Sunrise has entered into an agreement with KL Kepong to jointly develop two mixed property development projects with a GDV of RM20 billion.
  • Unrecognised revenue amounting to RM3.4 billion as at end-2013 will contribute to FY14’s performance despite challenging headwinds in property sector.
  • The company is looking to appoint a new managing director and chief executive officer within a month’s time, following the resignation of Datuk Wan Abdullah Wan Ibrahim due to health concerns.

Brokers’ Recommendations & Catalysts
Investment research firms are mixed on UEM Sunrise, with several firms issuing “Buy” calls, while several others have “Hold” rating on it. No rating houses, however, have set its target price below the last issued open price, nor a sell recommendation.

RHB Investment Research has issued a trading “Buy” call on UEM Sunrise with its last opening price set at RM2.09 and a target price of RM2.73. Public Bank is even more optimistic, issuing a “Buy” call with a target price of RM3.20.

Kenanga Research is the most optimistic of all, setting its target price at RM4.68.

Meanwhile, both MIDF Research and Maybank IB are taking a more cautious approach, issuing “Holds”. MIDF has set its target price at RM2.26, while Maybank IB is even more downbeat, setting a target price of RM2.12. The opening price was also at RM2.09.

Notably, Maybank is cautious on the increasingly-crowded Iskandar Malaysia area on top of the new property cooling measures by the federal and state governments. Kenanga also noted that 1Q14 would be a quiet quarter as the market adjusts to the new property market measures.

While exercising caution on the property market, Kenanga also believe that the downside risk is limited at this juncture and anticipates more land swap deals to unfold over the next six to 12 months. It said, “We expect sentiment to recover by mid-year once all the negatives have been fully digested”.

Price Chart of UEM Sunrise

Source: FactSet

This article is brought to you by Bursa Malaysia Berhad. The research in this article was conducted independently by Pioneers & Leaders (Publishers) Pte Ltd (“Pioneers & Leaders”) and the views and opinions expressed in this article are Pioneers & Leaders’ own and do not represent the views and opinions of Bursa Malaysia. Bursa Malaysia does not warrant or represent, expressly or impliedly as to the accuracy, completeness and currency of the information in this article. In no event shall Bursa Malaysia be liable to the reader or any other third party for any claim howsoever arising out of or in relation to this article.
This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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