Research firms cautiously optimistic on UEM Sunrise’s move to strategise landbank

Research firms cautiously optimistic on UEM Sunrise’s move to strategise landbank

UEM Sunrise Berhad has acquired 6.39 acres of prime freehold land in downtown Kuala Lumpur, at the intersection of Jalan Sultan Yahya Petra (formerly known as Jalan Semarak) and Jalan Padang Tembak for a total consideration of RM384.0 million, following the signing of a Sale and Purchase Agreement with Nipponkey Sdn Bhd. — Picture courtesy of UEM Sunrise Bhd

Friday, 05 Aug 2022 1:09 PM MYT

KUALA LUMPUR, Aug 5 ― Research firms are cautiously optimistic about UEM Sunrise Bhd’s move to strategise its landbank portfolio following its land acquisition announcement yesterday.

UEM Sunrise through its indirect wholly-owned subsidiary, Lucky Bright Star Sdn Bhd, has proposed to acquire 2.58-hectare (ha) land located at Jalan Yahya Petra, Kuala Lumpur for a total purchase price of RM384.04 million.

The investment is to be satisfied via a cash payment of RM235.79 million and RM148.25 million in kind.

In a research note, Hong Leong Investment Bank Bhd (HLIB) said UEM Sunrise’s move to strategise its landbank would provide investors with more clarity on its strategy, moving forward.

It noted that in recent years, the group had embarked on land disposal exercise for cash proceeds. However, in this instance, the proceeds from the land disposal will be used to fund the property development in the central region.

“We view this as a better use of the land sales proceeds as it provides a more sustainable growth plan for the group.

“Besides, it also signals the group’s resolve in its rationalisation plan to strategise its landbank portfolio, for example ― to dispose of non-strategic land and acquiring strategic land for development,” HLIB said.

The firm remains cautious on the group especially given the weakening sales momentum after the end of the Home Ownership Campaign.

“Furthermore, the rise in construction cost, labour shortage and interest rate upcycle are challenges that the group will face in its path to return to profitability. The group also has a large landbank exposure in Johor where the property outlook remains weak,” it said, adding it has maintained a ‘Hold’ call on the stock with an unchanged target price (TP) of 30 sen per share.

Meanwhile, Public Investment Bank Bhd noted that the move is consistent with UEM Sunrise’s strategy to reduce its landbank exposure in Nusajaya, with land cost at 26 per cent of the projected gross development value (GDV) of RM1.5 billion.

“No change to our earnings estimates as the deal is expected to be completed only in the first half of 2023. We have maintained a ‘Neutral’ call with an unchanged TP of 33 sen per share.

At 12.20pm, UEM Sunrise’s shares rose one sen to 31 with 1.99 million units changing hands. ― Bernama