Hot Stock: UEM Land bucks sector fatigue

PETALING JAYA (Nov 14): The largest property developer in Malaysia by landbank, UEM Land Holdings Bhd, saw its securities bucking the fatigue trend of the property sector today as its share price increased by as much as 7 sen or 3.2% to RM2.21 in morning session while its call warrant UEM Land-CO rose 60% to 4 sen.

At 12.30pm noon break, UEM Land ended up 4 sen at RM2.17 on trading volume of 5.76 million shares, while UEM Land-CO rose 1 sen or 40% to 3.5 sen on trading volume of 5.85 million units.

The general trend of the property sector during the morning trading session was sluggish, with very few counters registering trading movements, especially among the big cap property stocks.

UEM Land was the only large cap property developer which was among the most actively traded this morning.

S P Setia Bhd increased by 2 sen to RM3.57, while IGB Corporation Bhd and Sunway Bhd traded unchanged at RM2.36 and RM2.33 respectively. Their respective trading volumes were 43,900, 40,800 and 50,100 shares.

Glomac Bhd increased a paltry half a sen to 83.5 sen with 28,200 shares done, while IJM Land Bhd traded 1 sen lower at RM2.10 with only 28,800 transactions done as at noon.

The increased interest in UEM Land was due to its large exposure to Iskandar Malaysia, as it is the largest private land owner in the southern economic corridor, said analysts.

Last week, Credit Suisse re-iterated its "outperform" rating on UEM Land, with an unchanged target price of RM2.85. "Key potential catalysts that could re-rate the stock are partnerships for new catalytic projects in Iskandar Malaysia, the finalisation of Singapore-Johor MRT," said Credit Suisse's report.  

"Johor is probably among the few bright spots for property development in Malaysia. Any movement in the share price of UEM Land is based on what is happening in Iskandar," said an analyst with an international investment bank.

Investors are probably betting on UEM Land's long term growth prospects in Iskandar Malaysia as an economic corridor, especially with increased interest shown by investors and the government of Singapore, commented another analyst with a local investment bank.

On Oct 23, UEM Land announced a joint venture with Ascendas Land Sdn Bhd, a unit of Singapore's Ascendas Group to develop a 519-acre plot of industrial land in Gerbang Nusajaya into an integrated technology park worth RM3.7 billion over nine years.

UEM Land has entered into a master agreement (MA) with Ascendas Land and will set up special purpose companies (SPC) which are 40%-owned by the group to develop the project in Gerbang Nusajaya in several phases.

Under the MA, UEM Land is to dispose the 519-acre plot to the SPCs for a consideration ranging from RM13 per sq ft to RM20.04 psf, for the latter to undertake the project development.

"This is not good for the short term because at RM13 psf minus the infrastructure cost of about RM2 psf, the land is sold at only RM11 psf, which is very cheap. However, by doing this, UEM Land is able to get Ascendas into the picture, which could increase the attractiveness of the project to Singaporean investors in the longer term," said the analyst.

UEM Land is also expected to announce more land sale to foreign parties in the near future, said the analyst.

She commented if UEM Land's share price increased to RM2.30 per share, investors are advised to convert their redeemable convertible preference shares (RCPS) into cash or shares.

"UEM Land's share price increased a lot when it announced the disposal of the plot of land to Suasana Prisma Sdn Bhd (the SPC to develop the first phase of Gerbang Nusajaya).

"When they announced the next land disposal, share price will increase again and investors who hold the RCPS should take the opportunity to convert them into shares or cash," the analyst suggested.