UEM Land - 1H12 sees weaker sales

Period    2Q12 / 1H12

Actual vs. Expectations

 1H12 net profit of RM161.8m was within the street but below our expectations, making up 45% of the street and 41% of our estimates. We had earlier assumed more aggressive billings on the back of the quicker than expected launch of Arcoris and SummerVOS. 

Dividends   None as expected. 

Key Results Highlights

 YoY, the 1H12 net profit grew 52% on the back of higher billings and the 1.8ppt expansion in EBIT margins to 23.1% on a higher product margin mix. Major revenue drivers were SummerSuites, MK28, Nusajaya projects and RM65.1m strategic land sales (refer overleaf). 

 QoQ, the 2Q12 PBT rose 82% to RM130.3m. 2Q12 is seasonally stronger than 1Q, resulting in a 68% surge in revenue. Billings from associate/JCE projects like Symphony Hills@Cyberjaya and Horizon Hills@Nusajaya have also increased with their earnings rising by 356% to RM27.8m. 

 The 2Q12 sales improved by 75% QoQ to RM505m due to new launches. However, the 1H12 sales of RM795m (7M12 stood at RM920m, -23% YoY) appears to be far behind ours and management’s FY12E sales target of RM3.0b. Notably, it did include the RM90m Puteri Harbour land sale to a foreign party.  

Outlook   Management is sticking to their headline KPI targets. They are working on en bloc sales, a RM50-60m Puteri Harbour land sale and have c.RM300m worth of booking sales to be recognised.

But we think the Klang Valley’s landscape will remain challenging and hence, we are lowering our FY12-13E sales targets by 10%-13% to RM2.7bRM3.3b. 

Change to Forecasts

 We are reducing our FY12-13E net profit by 8%-20% given our lowered sales targets. The unbilled sales of RM1.9b provide a 1 year visibility.

Rating  Maintain OUTPERFORM

Valuation    Lowering our TP to RM2.26 (RM2.65 previously) on a wider 31%* discount (from 19%) to the FD SoP RNAV of RM3.28. We are still bullish on Johor but have trimmed our TP to reflect increasing concerns of the company not meeting FY12E sales target as well as GE risks.  The stock is trading closer to the rough levels of 1.6x Fwd PBV, implying limited downside risks at this juncture.

Risks   Unable to meet sales target. An up-cycle in Singapore’s property sector. GE and sector risks, including negative policies.

Source: Kenanga