Better second quarter for UEM Land

UEM Land Holdings Bhd (Aug 30, RM1.85)
Maintain buy at RM1.89 with target price of RM2.25: Revenue growth for the second quarter of the financial year ending Dec 31 (2QFY12) was flat year-on-year (y-o-y), but jumped 68% quarter-on-quarter (q-o-q) to RM510.8 million, mainly on increased sales and construction progress from developments in Nusajaya (East Ledang, Nusa Bayu, Nusa Idaman), MK28 and Quintet.

Net profit for the quarter came in at RM107.6 million, an increase of 21% y-o-y (99% q-o-q) on higher contribution from associates (Setia Haruman Sdn Bhd) and joint ventures (Horizon Hills, Iskandar Malaysia, Johor). Net profit of RM161.7 million for the first half (1H) was still lower than expected, accounting for only 39% and 45% of our and consensus full-year estimates, as the group had a slow start in 1Q.

Property development contributed 84% to the Group’s 2Q revenue, with the bulk coming from non-Nusajaya projects (RM246.8 million) and the remaining from Nusajaya projects (RM180.8 million). The second quarter saw higher strategic land sales of RM61.2 million compared with RM4.7m in 2QFY11, which contributed 12% to revenue. No dividends were declared for the quarter.

UEM Land secured RM795 million in property sales in 1H (2Q: RM505 million) which made up 27% of the group’s FY12 sales target (of RM3 billion) and 46% of ours. Total sales generated in January to July were RM920 million. The group’s unbilled sales as at June 30, 2012 stood at RM1.85 billion.

Management is still confident of achieving its RM3 billion sales target with most sales expected to come in by 3Q and 4Q. This is partly due to the delay of some of the group’s launches such as the Puteri Harbour-CS2 project and Arcoris.

For the rest of FY12, the group has targeted new launches with a total gross development value (GDV) of RM3.3 billion. These include the RM1 billion Angkasa Raya project.

However, it has decided to defer the launches of SL1 (Kajang) and MK22. Ongoing projects are progressing well with MK28 slated for completion by end-2012.

We make no changes to our earnings estimates. Maintain “buy” with realisable net asset value-based target price of RM2.25. — ECM Libra Research, Aug 30