UEM Sunrise rises on speculation of corporate exercise

  • Property
  • Saturday, 12 Sep 2015

Land sale: Yachts and boats sit moored at the public marina at UEM Sunrise Bhd.’s Puteri Harbour residential and commercial development in Nusajaya, Johor. UEM Sunrise has sold some parcels of land to other developers in Johor. – Bloomberg.

THE trading volume of UEM Sunrise Bhd shares surged to a multi-year high yesterday while the share price soared by 14 sen or 15% to RM1.06.

It was the second most active counter yesterday with a turnover of 140 million shares on the back of speculation that the company was ripe for a corporate exercise.

One of the reasons was its low valuations.

At current price, the stock is trading at a trailing price-to-earnings of 10 times while the forward valuation was 13.25 times, according to Bloomberg data.

But even that, the stock has been beaten 30% year to date. Just two weeks ago, the stock touched a five-year low of 84.5 sen.

As at June 30, the stock’s net asset per share was RM1.40.

Meanwhile, its gearing was only at 0.285 times.

Observers, however, think that any potential plans were too preliminary.

Some say Khazanah Nasional Bhd, which owns 66%, in the company could have something in the pipeline for the company considering its low valuations.

“Even though the share price is low now, I don’t see why the company could be a privatisation target at a time when the economy is so difficult. But there won’t be smoke without fire either,” says a broker.

Another observer points out that the company would also have to get the necessary support from the minority shareholders. Its other substantial shareholders included the Employees Provident Fund with a 5.2% stake and Lembaga Tabung Haji with a 5.06% stake.

The company has yet to respond to StarBizWeek’s queries as at press time.

Recall that UEM Sunrise is the result of a merger between UEM Land Holdings Bhd and Sunrise Bhd back in 2010.

Back then, Sunrise was known for its branding and ability to build high-yield integrated projects while UEM Land has the land bank.

The marriage catapulted it into one of the biggest developers in Malaysia.

The property player has a landbank of 15,000 acres in Malaysia and overseas but more than three quarters of the land is in Johor.

The stock was sold down recently because of its huge exposure in Iskandar and the fear of an oversupply in residential units there.

When the Johor market was booming, UEM Sunrise managed to sell a few parcels to other developers and made some handsome profits. One of the high-profile land deals back then was a 12.5-acre in Puteri Harbour, Nusajaya sold to Robert Kuok’s company.

At the peak of the Johor property rush, the real estate firm’s market cap was close to RM11bil at the end of 2013. Now, the market cap is less than half of what it was at RM4.8bil.

For its financial year ended Dec 31, 2014, its revenue added 9.5% to RM2.66bil while profits fell 11% to RM609.17mil.

In an earlier interview with StarBizWeek, its managing director Anwar Syahrin Ajib said the company would look to diversify into other areas including Kuala Lumpur with an allocation of RM500mil.

However, he’s not overly concerned over Johor’s long-term outlook as businesses would eventually shift out of Singapore into southern Johor.

Even now, the demand for industrial properties in Johor is still strong. It has received overwhelming response for its RM1.3bil Southern Industrial and Logistics clusters.

After selling out the first two phases, it will be launching 300 acres for the third phase.

Out of Johor, the company partnered Sime Darby Property Sdn Bhd to develop Radia Bukit Jelutong in Shah Alam. The mixed project has a gross development value (GDV) of RM1.2bil and saw a 75% take up for two of the residential blocks it launched in April last year.

Overseas, it has Aurora Melbourne Central in Australia and Alderbridge in Canada.

The 92-storey integrated development in Melbourne’s Central Business District has a GDV of A$552.3mil (RM1.68bil). As at end December 2014, 89% of the 941 residential units were sold.

In April 2014, it bought 4.9 acres in Richmond, Vancouver in Canada.

It plans for Alderbridge to be a C$420mil (RM1.37bil) integrated project to be launched in 2017. Its existing project in Canada, Quintet, is coming to a tail-end.

“We expect continued income from our overseas developments will cushion any downside in revenue from our local properties,” it said in its annual report.

It expects Aurora Melbourne Central to bolster earnings for the next three to five years as it has yet to launch the retail, commercial and serviced apartment/hotel in the pipeline. These components have a GDV of close to A$180mil (RM547.7mil) and are slated to be launched before year-end.

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