UEM Land at record high, set to transform into blue chip

KUALA LUMPUR: Shares in UEM Land Bhd rose to a record high of RM2.90 on Thursday, Jan 6, as Credit Suisse Group AG expected the property developer to become a blue chip proxy for improved Singapore-Malaysia relations, especially under the proposed transformation of its large landbank in Iskandar Malaysia.

UEM Land shares rose 35 sen to RM2.90 with 25.53 million shares transacted following the latest development in its takeover of Sunrise Bhd and also in line with the bullish equities sentiment.

UEM Land announced on Thursday that it had issued 217.049 million shares and 808.456 million redeemable convertible preference share (RCPS) as the first batch of settlement for the Sunrise shares which it had acquired under the conditional takeover. It added these shares would be listed and quoted today whilst the RCPS would not be listed on any stock exchange.

The surge in its share price was also in line with the positive outlook for Malaysian equities as the 30-stock FBM KLCI scaled to fresh record highs, ending the day 2.2 points higher at 1,568.37.

On Thursday, Credit Suisse said in a research note said it believed that "some of the most conservative fund managers who currently would not consider owning UEM Land will, this time next year, have the stock as a core holding".

To recap, in early November, UEM Land proposed a conditional takeover of Sunrise at RM2.80 per share, which valued the acquisition at RM1.39 billion. Sunrise's shareholders were offered two options for each Sunrise share: a straight share swap exercise of 1.33 UEM Land shares priced at RM2.10 per share, or 2.8 RCPS in UEM Land at an issue price of RM1.

The move would create Malaysia's largest property company with a market capitalisation of nearly RM10 billion then and a 12,000-acre landbank.

Credit Suisse, had in an earlier note, said among the spate of mergers and acquisitions among property companies this year, it was most excited about the UEM Land-Sunrise merger, especially with Sunrise executive chairman Datuk Tong Kooi Ong leading UEM Land's charge in Iskandar Malaysia.

In the latest research note, Credit Suisse said Tong was now heavily incentivised to deliver a turnaround at UEM Land, noting his strong track record in innovation and value creation.

"We believe the market will upgrade its earnings forecasts as Tong delivers real property sales from an innovative development strategy. This will serve to enhance the credibility of RNAVs.

"We believe UEM Land will become more of a blue chip proxy for improved Singapore-Malaysia relations as its asset value is enhanced," it said.