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UEM Land extends rebound on positive newsflow

PETALING JAYA (Nov 10): Shares in UEM Land Holdings Bhd extended their rebound after falling sharply in September, buoyed by positive newsflow on its projects and bargain hunting activities after a bout of heavy foreign selling.

Since hitting a 52-week low of RM1.58 on Sept 26, shares of the government-linked property developer has been rebounding strongly, gaining some 35.4% to close at RM2.14 on Wednesday.

On Wednesday, the stock added three sen to RM2.14 on heavy volume of 10.56 million shares, following the unveiling on Tuesday of its latest project, Angkasa Raya, opposite the Petronas Twin Towers in the heart of the Kuala Lumpur City Centre (KLCC) area.

Despite the recent rally though, the stock remains 15% down year-to-date, and is trading 37% lower than the year high of RM3.40 chalked up on Jan 13, 2011.

The stock price slump in September coincided with the global sell-down in the wake of the US credit downgrade and European debt problems. As UEM Land was gaining favour with foreign investors throughout this year, following the acquisition of Sunrise Bhd, it was among the stocks that foreigners held — and decided to sell.

While the global uncertainties had created concerns over the outlook of the property sector, UEM Land continued to enjoy brisk sales for its most recently launched project, Arcoris Suites Mont'Kiara, developed by its subsidiary Sunrise.

Sunrise had already sold most of the units in Arcoris Suites ahead of the official launch at the end of October. Some 90% of the available 262 units were sold following an earlier preview ahead of the launch, and the project was fully sold out after the launch.

The business suites are priced from RM383,000 or RM660 psf, with built-ups ranging from 660 sq ft to 850 sq ft.

The good response, despite the external uncertainties and concerns over an oversupply of office space in Kuala Lumpur and overbuilding in Mont'Kiara, is a strong testament to the Sunrise brand, industry observers said. The strong sales of Arcoris Suites followed the sell-out of the first phase of Summer Suites in Kuala Lumpur earlier this year, and Quintet in Richmond, Canada, which were all developed by Sunrise.

Analysts had earlier given the thumbs up for UEM Land's acquisition of Sunrise, as Sunrise would give the former a strong brand, technical expertise and a strong pool of near term earnings from unbilled sales and a pipeline of ready-to-launch projects in the Klang Valley.

Sunrise's latest project, Angkasa Raya, is a RM1.3 billion mixed development project designed by world renowned architect Ole Scheeren.

Situated at the intersection of Jalan Ampang and Jalan P Ramlee, the building will be on the 1.59-acre site of the former Wisma Angkasa Raya, which was demolished in August 2011. It will be standing at 268 metres with 65 floors, and comprise grade A premium office space, a luxury hotel, over 280 high-end serviced residences, signature retail spaces and three sky levels.

"There are obviously challenges in the world and the property market now but we believe that this building will not only be iconic in Malaysia but also the world over. Everywhere in the world, the primest of prime properties will always be sought after," said Datuk Tong Kooi Ong, chairman of Sunrise at the unveiling of the building's design on Tuesday.

The project is expected to bring an estimated net profit of RM30 million per year to UEM Land's bottom line for the financial years 2013 to 2017, according to UOB Kay Hian's research note on Wednesday. The research firm has a "buy" call on UEM Land, valuing the stock at RM2.68, a 25% discount to its revalued net assets value per share (RNAV/share) of RM3.57.

"The project would add about two sen to our fully-diluted RNAV/share. We maintain our earnings forecasts for now. A back-of-the-envelop calculation shows that the development could add RM30 million to UEM Land's bottom line for FY13-17, or about 9% of its FY12 net profit. We maintain our buy call with a target price of RM2.68.

"This new valuation takes into account the lingering uncertainty of the property market as well as the gloomy outlook of the macro picture," the research house said.

Over the longer term, UEM Land's vast land bank in Iskandar Malaysia will be a bigger attraction for investors, as the land is seen as proxy for warming Malaysia-Singapore bilateral relations, growing cross-border investments to Johor and narrowing gap between Singapore and Johor land prices.

In June, UEM Land was appointed the project manager for M+S Pte Ltd, a joint venture company 60% owned by Khazanah Nasional and 40% by Temasek. M+S was set up to undertake the development of several prime plots of land in Singapore — Ophir-Rochor and Marina South — in exchange for the KTM Bhd land in Tanjong Pagar.

"We are excited over UEM Land's appointment as project manager for the S$11 billion (RM26.7 billion) Marina South and Ophir-Rochor government land developments in Singapore.

"The earnings impact for a project manager role is minimal, at 3%-4% of our Ebit (earnings before interest and tax) estimates, but we believe its presence in Singapore has a more positive impact — in promoting UEM Land's RM19 billion of properties in Nusajaya," according to Maybank Investment Bank in an earlier research report.

For the six months ended June 30, UEM Land's net profit more than doubled to RM106.54 million from RM43.49 million a year earlier. Its net assets per share on June 30 stood at RM1.03, placing the stock's price-to-book at 2.08 times.

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