News UEMLAND has proposed to undertake the development
of a high-end residential resort and surrounding 2 golf courses on Desaru,
Johor via its 51% owned subsidiary, Dev Co; the remaining 49% is owned by
Desaru Development Corporation S/B (DDC), which is a subsidiary of its major
shareholder and Malaysia’s sovereign fund, Khazanah Nasional. The land spans
678.7ac with a purchase consideration of RM485.3m, which is close to its appraised
value of RM485.7m.
Comments Progressive land payment over 5.5 years will
help ease cash flow constraints. UEMLAND will provide shareholders advances to
the Dev Co (RM97.1m) or 20% of the land payment for the first 18 months. We expect
FY12-13E net gearing to increase from current 0.14x to 0.15x each, which is
still within our comfort zone of <0.5x. (Refer overleaf for details).
GDV of RM5.4b will be
a coastal development offering an integrated high-end resort lifestyle to tap onto
the PETRONAS RAPID O&G play. Developments will likely kick off end FY13 and
span 20 years.
Long term positive.
Land comparatives are tough to ascertain as the said land is readily to be
developed while there aren’t many available transaction data.There are less
than a handful of developers with major landbanks in the greenfield area of
Desaru. We consider fair pricing since land cost only makes up 9% of GDV.
Outlook Developments will likely kick off 4Q13 and
spans 20 years. Meanwhile, we look forward to potential en bloc sales, new
launches and Nusajaya land sales in 2H12.
Forecast Maintain FY12-13E earnings since impact from
the return on shareholders advances and increased gearing is immaterial
(<1%).
Rating Maintain
OUTPERFORM
Beneficiary of the
burgeoning demand of properties in Iskandar Malaysia, with 2011 tipping point
as catalysts with spill-over impact from Singapore.
Valuation FD SoP
RNAV increases marginally by 2.0 sen to RM3.28 given its long gestation impact
on DCF of future earnings.
No changes to TP of
RM2.65 based on 19%* discount to FD SoP RNAV of RM3.28.
Risks Unable to meet sales target. The up-cycle of Singapore’s
property sector. Sector risks, including negative policies.
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