PETALING JAYA: After calling off two deals in recent weeks, UEM Sunrise Bhd (UEMS) now has to refocus and possibly look for new land bank to forge ahead.
The much talked about merger between Eco World Development Group Bhd and UEMS was called off for reasons best known to them some weeks ago.
This week, UEMS and Mulpha International Bhd called off their joint venture for a RM5bil gross development value (GDV) mixed development in Nusajaya.
The company also got a new chief executive officer in Sufian Abdullah early this month.
With so much going on in the past few weeks, UEMS has to take stock of its future growth.
Sufian will have to chart a new course for UEMS pretty soon. Though he has sound knowledge of the property sector given his last involvement as chief executive officer of KWest Sdn Bhd, which was KWAP’s arm for investments into property projects.
Looking for new land bank beyond Iskandar Malaysia (IM) is a given for UEMS to move beyond that region.
Maybank IB Research in a note said that UEMS prefers pocket-sized land with fast turnaround potential due to its lower upfront costs as compared to township projects.
It added that while UEMS remains conservative and careful with its balance sheet in view of the uncertainties on the local property market front, it does not discount the possibility to acquire more land bank outside of the IM region. It bought 73 acres of land in Kepong in April 2018 worth RM15bil in GDV.
“With the current slowdown, it should actively look around as it may land with some pockets of land at reasonable prices, ’’ said an analyst.
Maybank IB added that UEMS is also looking to acquire a new land bank in Australia after the completion of Aurora Melbourne Central and Conservatory projections, the brokerage said.
It said the potential land acquisitions will be funded via debts and non-core land sales.
For now, 75% of total GDV is derived from Johor, mostly located in the IM area.
UEMS, according to the report, aims to achieve more than 10%-20% sales growth for financial year (FY) ending Dec 31,2021.
The house maintains its earnings forecast pending the release of its fourth quarter 2020 financial results next week.
The house expects UEMS to report RM7mil in net profit while analysts consensus expect a RM1mil net loss.
Maybank maintains a “hold’’ on the stock with a target price of 43 sen.
Year-to-date, the share price has been hovering around the 35-50 sen range. It closed at 41.5 sen yesterday.
As for the financial year 2021, it said sales growth will be driven by RM1.3bil worth of new launches of which 74% will be in the Klang Valley and 26% Iskandar Malaysia.
The inventories are worth RM498mil in cost as at Sept 2020, the report said.
The new launches include the new project at Taman Permata, Cheras (RM1.1bil GDV; to be launched by fourth quarter FY21).
The 11.5 acres of leasehold land will be developed into apartments, Residensi Wilayah and low cost apartments.