UEM Land surges ahead of inclusion into MSCI index

PETALING JAYA: UEM Land Holdings Bhd's (UEML) share price surged on Tuesday, May 24 in heavy trading of over 24.1 million shares ahead of the stock's inclusion into the 30-stock MSCI Malaysia index on June 1, together with Malaysia Marine and Heavy Engineering Bhd (MMHE) and Malaysian Airports Holdings Bhd (MAHB).

UEML rose seven sen or 2.9% to RM2.81 while volume more than tripled from 6.8 million shares on Monday.

Malaysia Airline System Bhd (MAS), which will be removed from the index, has seen its share price declining, likely due in part to rising jet fuel prices. The counter fell to a multiple-year low of RM1.59 on Tuesday.

Apart from high jet fuel prices, airline stocks globally were also affected by concerns over the strength of the recovery in the US and Europe, and the potential for flight disruptions caused by the volcano eruption in Iceland.

Following the acquisition of Sunrise Bhd by UEML last year, the stock is the largest property player on FTSE Bursa Malaysia KLCI (FBM KLCI), with a market capitalisation of just over RM11 billion.

Analysts and fund managers have touted UEML as one of their top picks for this year, as the company is expected to embark on a new strategy to develop its vast landbank in Iskandar Malaysia.

Analysts expect the company to benefit from Sunrise's strong branding and large near-term earnings, as well as the expertise of Sunrise chairman Datuk Tong Kooi Ong in helping plan the development.

According to a report by OSK Research, the inclusion of the stock into the top 30 stocks listed on the local bourse will boost its visibility among investors.

"Once included, UEML would be the only pure property stock in the index. This, we believe, will raise UEML's profile and visibility, and subsequently justify its premium valuation given that the FBM KLCI top 30 stocks are typically used as a benchmark portfolio," said an analyst, adding that UEML would be a good proxy to the government's Economic Transformation Programme.

According to Credit-Suisse, Malaysia's equity market will receive net inflows of US$181.5 million (RM553.6 million) after the MSCI semi-annual review which will be effective on June 1.

Among the beneficiaries ranked by aggregate value are CIMB Group Holdings Bhd, MMHE, UEML, MAHB and Petronas Gas Bhd. Among the beneficiaries, the research house has "outperform" calls on CIMB, UEML and MAHB.

The improved political and diplomatic relations between Malaysia and Singapore have also benefited UEML, according to analysts, noting that the implementation of the Point of Agreements between governments of the two countries has been on track.

According to Credit-Suisse, the warmer Malaysia-Singapore relations will be positive for the development of the Iskandar region.

"This clearly demonstrates that both countries are right on track on the key action points agreed when the two prime minsters met at a retreat in May 2010.

"We believe that Temasek's participation in the wellness project in Iskandar will be positive for sentiment there and could lead to other Singapore companies following suit," it said in a report dated March 31.

The report added that the Malaysia-Singapore Joint Ministerial Committee for Iskandar met in Singapore on March 31 for the eighth working committee meeting.

Among the meeting's key highlights, it said, were progress in talks to develop Iskandar's wellness township project (targeted for launch in May 2011); a joint engineering study for a rapid transit system link between

Iskandar and Singapore (scheduled to start operations by 2018) and more measures to improve taxi and bus connectivity between Malaysia and Singapore.

Analysts said the improved sentiment among Singaporean investors would be good news for UEML due to its large landbank in Iskandar.