UEMLAND (FV RM3.17 - TRADING BUY) 1QFY12 Results Review: Starting on The Right Foot

Although UEM Land’s (ULHB) 1QFY12 net profit only accounted for about ~15% of our and consensus’ FY12 net profit forecasts, we  deem  the results in line with both estimates  given that 1Q is typically the weakest quarter, and  on our expectations that the company’s performance would be  robust for the rest of the year. We maintain our forecast and Trading Buy recommendation on ULHB, at an unchanged FV of RM3.17, based on a 10% discount to our RNAV valuation.

 

Within expectations. ULHB’s net profit of RM54.2m in 1QFY12 accounted for about 15.6% and 15.2% of our and consensus’ FY12 forecasts. We view the results as in line with our estimates since 1Q is typically the weakest quarter for the company, largely on account of seasonal factors, and our expectations of a stronger showing in the remaining quarters, driven by robust progress billings and some potential strategic land sales this year. As at end-March 2012,  ULHB’s unbilled sales totaled RM1.85bn. We think with several future launches in the pipeline, the group should be able to further improve, or at least sustain its  current unbilled sales, which will subsequently provide strong future earnings visibility.

Good start  to 2012. Revenue surged 61.8% y-o-y, driven by higher progress billings while net profit was up two-fold y-o-y, in line with the higher revenue and improved margins. EBIT margin jumped  to  24.9% in 1QFY12 compared with 17% in 1QFY11, possibly owing to further consolidation of Sunrise’s contribution, as well as synergy arising from the acquisition of the latter and completion of the takeover in early January last year. Owing to seasonal factors arising from the fewer working days and an exceptionally strong 4QFY11 boosted by strategic land sales, the company’s 1QFY12 was significantly weaker q-o-q.

Maintain Trading Buy. We maintain our forecasts and Trading Buy recommendation on ULHB, at  an  unchanged FV of RM3.17, based on  a  10% discount to our  RNAV valuation. As  its profitability continues to  improve,  the group’s  PER multiple will accordingly compress to more reasonable levels compared to its elevated historical PER multiples. With its strong exposure in Nusajaya, ULHB remains the best proxy  to Iskandar Malaysia, which is  widely  expected to reach its  inflection  point this year following the completion of several catalytic projects in the region. 

Source: OSK