UEM Sunrise Bhd (Aug 10, RM1.14)

Maintain hold with a higher target price (TP) of RM1.09 from RM1.08 previously. UEM Sunrise Bhd’s internal sales target of RM1.5 billion for financial year 2016 (FY16) seems challenging to us in view of the weak buying sentiment and stiff competition in the domestic front, as well as the delay in launching its Melbourne project.

We adjust our FY16 to FY18 earnings forecasts by down 6% to down 9%. Our revalued net asset value (RNAV) TP is largely intact at RM1.09 on an unchanged 60% discount to RNAV.

Sales for UEM Sunrise’s affordable housing projects have been satisfactory but that for high-end/high-rise projects such as Estuari and Almas remain slow.

To entice potential buyers, UEM Sunrise launched the Signature Selection campaign between April and May 2016.

This campaign has successfully raked in RM154 million in sales, we understand.

Elsewhere, sales in Iskandar Malaysia (IM) is expected to pick up in the 2H with the launch of SiLC Phase 3 in fourth quarter 2016.

UEM Sunrise is keeping its 2016 sales target of RM1.5 billion for now, despite weak sales in the three months 2016.

It has lined out RM760 million worth of new launches in 2H16 to push sales.

However, we think UEM Sunrise’s sales target for 2016 is a challenge after considering the current weak sentiment in Malaysia property and the delay in launching its St Kilda project in Australia.

Our new sales forecast for 2016 is RM1.37 billion, having revised down by -14%.

We lower our FY16 to FY18 earnings forecasts by 6%, 9% and 8% to factor in two new projects in Melbourne, and lower sales forecasts for FY16 and FY17.

A surprise could come from potential land sales worth RM200 million to RM300 million at Puteri Harbour in IM. — Maybank Investment Bank Reseach, Aug 10

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This article first appeared in The Edge Financial Daily, on Aug 11, 2016. Subscribe to The Edge Financial Daily here.

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