UEM Land (ULHB MK, TRADING BUY, FV: RM3.17, Close: RM2.22)

UEM Land’s (ULHB) FY11 net profit came in well above our and consensus expectations, making up 134% and 125% of the respective FY11 forecasts. The outperformance was largely driven by higher-than-expected revenue and strong 4QFY11 net profit which accounted for about 46.6% of the full-year profit. We are raising our FY12 net profit forecast by 30% and introducing our FY13 forecast. We maintain our Trading Buy call on ULHB at an unchanged FV of RM3.17 based on a 10% discount to our RNAV valuation.

Beating our and street estimates. ULHB recorded a net profit of RM301.7m for FY11 which came in 34% and 25% above our and consensus full-year estimates respectively. The better-than-expected results were largely due to robust revenue from property development and strategic land sales in 4QFY11. It had an exceptional 4QFY11, where quarterly net profit alone accounted for a whopping 46.6% of the full-year earnings. For 4QFY11, property development recorded a 45% q-o-q growth in revenue, while raking in RM87m from strategic land sales to the Johor State Government vis-à-vis RM13.5m for 3Q. Notably, due to the consolidation of revenue from its acquisition of Sunrise, ULHB recorded a 261% y-o-y growth in revenue, though net profit was up by only 55% y-o-y as property development, which now has a significantly bigger contribution, commands a lower margin relative to that of strategic land sales.

Unbilled sales at RM1.85bn. For FY11, ULHB recorded total property sales of RM2.2bn with unbilled sales standing at RM1.85bn as at end-FY11. Despite the weaker sentiment in the property market, it has maintained its sales target of RM3bn for FY12 with several new projects to be launched in the Klang Valley, Cyberjaya and Nusajaya this year.

Maintain Trading Buy. In light of the sterling FY11 results, we are raising our FY12 net profit forecast by 30% after revising up our revenue forecast  on the back of the strong unbilled sales and future launches. We also take this opportunity to introduce our FY13 forecast. We maintain our Trading Buy recommendation at an unchanged FV of RM3.17 based on  a  10% discount  to our RNAV valuation. As  its profitability continues to improve, ULHB’s PER multiple will also continue to compress to a more reasonable level compared to its elevated historical PER multiples.

Source: OSK188