Brighter times ahead for UEM Sunrise

Public Invest noted that UEM Sunrise has RM1.9bil in unbilled sales and a net gearing of 0.40 times, with a cash balance of RM1.3bil.

PETALING JAYA: UEM Sunrise Bhd could see a rebound in earnings based on several factors as the country moves forward from the pandemic.

These expectations are based on strong unbilled sales, a sound balance sheet and an improving economic climate.

The property development company reported a net loss of RM137.4mil in its fourth quarter, mainly due to a provision for impairments.

According to Public Invest Research, UEM Sunrise’s reported full-year results were below its and consensus’ estimates.

The research house noted that a rebound in earnings could be on the way.

“For the financial year 2021 (FY21), the company is eyeing sales and gross development value (GDV) of RM1.2bil.

“All told, we cut our FY21 and FY22 estimates by 35% and 32%, respectively, after imputing slower sales and lower margins, ” it said.

Public Invest noted that UEM Sunrise has RM1.9bil in unbilled sales and a net gearing of 0.40 times, with a cash balance of RM1.3bil.

The research house maintained its “neutral” call on UEM Sunrise with an unchanged target price of 55 sen, pegged at a 75% discount to the realised net asset value (RNAV).

Meanwhile, RHB Research is more optimistic as it expects a rebound in UEM Sunrise’s earnings in the quarters ahead.

It maintained its “buy” call on the stock with a target price of 53 sen from 55 sen previously. This is based on an unchanged 80% discount to its RNAV.

RHB Research noted that UEM Sunrise’s recent results had missed expectations but this was mostly due to one-off write downs in inventory and property assets.

“Management has set a decent sales target of RM1.2bil, with RM1.2bil in new launches. We expect earnings to rebound in FY21 after the kitchen-sinking exercise in FY20, ” it said.

RHB Research noted that the quarter had seen UEM Sunrise’s new property sales hitting RM751.8mil.

“The spike was mainly attributed to the land sale in Southern Industrial and Logistics Clusters (SiLC) to AME Elite Consortium worth RM434.3mil.

“Other projects that contributed to the sales include Residensi AVA Kiara Bay (RM97.9mil), Serene Heights Bangi (RM106.1mil), Residensi Astrea (RM57.1mil), Solaris Parq (RM70.1mil) and Residensi Allevia Mont’ Kiara (RM53.6mil), ” it said.

It noted that UEM Sunrise’s unsold completed inventory dropped slightly to RM468mil from RM541mil last year while property sales in the fourth quarter had surged, with total sales of RM1.13bil for the year 2020.

“Some transactions are also expected to lift FY21 and FY22 earnings, including the share sale agreement with KLK Land, land sales in Tapah and the SiLC.

“We have, therefore, adjusted our earnings accordingly to reflect the completion of these transactions, ” RHB Research said.

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