UEM Land - Full-steam ahead!

News     UEMLAND has entered into a 30:70 JV with Fastrack Autosports Pte Ltd (FA) via a SPV, Crimson Carnival S/B (CC). The SPV will acquire 270ac in Gerbang Nusajaya for RM223.5m (RM19psf) to develop it into a Motorsport City. 

Entered into MoU with Chinamall Holdings Pte Ltd (CH) to cooperate in the development of China Mall, a trade and exhibition centre in Gerbang Nusajaya. UEMLAND will develop and own the mall while CH will be the master tenant as it will be the operator. 

Collaborative agreement with Telekom Malaysia, IIB, Cisco Systems Int’l BV (Cisco) and Centios Co Ltd (Centios) to turn Nusajaya into a Smart City. 

Comments     Motorcity  is  expected  to  have  GDV  of  RM3.5b (immaterial impact on RNAV) although it remains unclear how much will be for sale or investment. Land sale price of RM19psf is considered fair when compared to Ascendas’ deal (average: RM18psf). As for the MoU with Chinamall, details are (e.g. size, investment amount) still sketchy and will be revealed later. 

Smart City intentions are new, although it is not surprising given the business, health and education content of Nusajaya. No CAPEX amount or timeline to roll-out the project was given. (Refer overleaf for details). 

Positive on the above as it creates employment which will aid with Nusajaya’s population growth; however, Motorsport City and MoU with Chinamall Holdings announcements were widely anticipated.

Outlook     Expect  more  positive  news  flows  over  FY13  (e.g. more tie-ups with Singaporean or foreign developers in Nusajaya, Gerbang Nusajaya to be getting Coastal Highway connection, news on Singapore-Johor MRT).

Forecast    Raise FY13E net profit by 23% to RM427m due to one-off net land sale gains of RM80m (after JV stake) arising from sale to CC SPV, which will likely be recognized in FY13E. Motorcity contributions are unlikely to be material in the next two years. 

 

Rating     Maintain MARKET PERFORM

Although we are bullish on Johor, where UEMLAND is the best proxy, our call reflects potential near term negative headwinds arising from; 1) potential exclusion from the FBMKLCI; 2) upcoming RCPS redemption of RM400m cash (vs. their current cash pile of RM575m and net gearing of 0.1x) if share price is at most RM2.30; 3) GE risks. 

Valuation     Maintain TP of RM2.28 based on 33%* discount to FD SoP RNAV of RM3.38. 

Risks    Unable to meet sales target.

An up-cycle in Singapore’s property sector.

GE and sector risks, including negative policies.  

Source: Kenanga