KUALA LUMPUR: Kenanga research is positive on UEM Sunrise Bhd
's move to reduce its exposure in Desaru due to the long gestation period and weak market sentiment in Johor.
It was announced on Friday that UEMS will be downsizing its residential development in Desary from about 680 acres to 228 acres.
UEM Sunrise also added that it would also acquire Somerset and Marina Walk Puteri Harbour for a sum of RM145mil.
"We opine that management’s move in reducing development exposure in Desaru to be a positive move.
"UEMS is set to receive RM107m from the proposed settlement with TAR&H, which will be used to offset part of the purchase consideration of RM145.0m for Somerset and Marina Walk Puteri Harbour, while the remaining RM38m will be settled by UEMS over five years, which would have minimal strain on UEMS’ existing net gearing of 0.49x (1Q19)," said Kenanga.
The research house noted that UEM Sunrise would have needed to pay an additional RM148.5mil to settle the remaining original purchase consideration based on the original development plan.
The funds can now go towards its existing projects and land banking activities in matured areas.
Kenanga maintained a market perform rating on the stock with a reduced target price of 83.5 sen from 85 sen previously due to revised GDP assumptions from the downscaling in Desaru.
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