UEM SUNRISE BHD

By MIDF Research Neutral Target price: RM1.24

UEM Sunrise Bhd is disposing 163.92 acres of freehold land in Iskandar Puteri to Country View Bhd for RM310mil. The proposed disposal is expected to be completed in the third quarter next year.

MIDF Research said it is neutral on the land disposal as UEM Sunrise has always been exploring to monetise its vast landbanks in Iskandar Puteri in Johor.

UEM Sunrise has vast landbanks of more than 10,000 acres in Johor, while the remaining acreage for Iskandar Puteri stands at 6,552 acres, which makes up 50% of its total landbank. MIDF said the land disposal allows UEM Sunrise to unlock the value of its landbank, and is expected to improve the company’s balance sheet.

Based on disposal consideration of RM310mil, the research house estimated the net gearing of UEM Sunrise to improve to 0.42 times from 0.47 times as at end second quarter. Nonetheless, MIDF said its earnings forecast on UEM Sunrise remained unchanged, pending further details from the management.

It maintains UEM Sunrise’s core net income of RM240mil and RM199mil for FY17 and FY18, respectively.

On UEM’s share price, MIDF said it maintained neutral on the stock due to the flattish property market outlook for Johor, with an unchanged target price of RM1.24. The target price was based on on 40% discount to revised net asset value or RNAV.