UEM Land - Selling Puteri Harbour land

News   Disposal of 2 parcels of land (43.6ac) located in Commercial North, Puteri Harbour, Iskandar Malaysia for RM400.8m to Liberty Bridge S/B (LBSB); expected completion by end FY13, pending relevant approvals (up to 7 months). Owners of LBSB are heavy-hitting individuals from Singaporean (UOL) and Malaysian (Multi Purpose, E&O, Land & General) development companies (refer overleaf). 

 

Comments   Although we are positive on the exercise, it was largely expected as we understand that UEMLAND will be either looking for JV partners or outright land sales to boost speed of development while tapping onto new target markets. The wealth of experience of LBSB individuals will further strengthen Puteri Harbour’s development potential. 

 Individual parcels were sold at RM167psf (29.0ac) and RM297psf (14.7ac). In 2010-11, the group sold Puteri Harbour land to Encorp and Tiong Nam Logistics for RM180psf and RM220psf, respectively. So it appears the average disposal price of RM211psf for both parcels is considered fair, although it is largely dependent on each parcel’s plot ratios (details unavailable); furthermore, our FD RNAV values Puteri Harbour land at RM235psf. 

 Expected gross gains on disposal will be RM240m (net gains: RM180m) or 60% gross margin. Hence FY13E gross margins will expand to 37% from 31%.  

 Net gearing lowered to 0.08x in FY13E from 3Q12’s 0.15x (refer overleaf), which is an extremely comfortable level for more landbanking. 

 

Outlook  Expect more positive news flows over FY13 (e.g. more tie-ups with Singaporean or foreign developers in Nusajaya, Gerbang Nusajaya to get Coastal Highway connection, news on Singapore-Johor MRT). We are also waiting for management’s FY13E sales guidance, although we expect it to be promising since Teega@Puteri Harbour (GDV: c. RM1b) bookings have been extremely promising. 

 

Forecast  Raise FY13E net profit by 33% (no changes to FY12E) after taking into account the gains on disposal and additional finance cost from the Sukuk issuance. Our FY12-13E sales are maintained at RM2.0b-RM2.7b. 

 

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 GE risks. Potential upside bias remains post GE.

 

Valuation   Higher TP of RM2.40 (RM2.28 previously) based on unchanged 33%* discount on higher FD RNAV of RM3.57 (RM3.38 previously) on removal of RCPS dilution risks.  

 

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

Source: Kenanga