UEM Sunrise targets young buyers

UEM-Sunrise acquisition of the Cheras site sits well with its strategy to expand its exposure in the central region.

KUALA LUMPUR: UEM Sunrise Bhd’s recent land acquisition in Cheras will increase the developer’s presence in the Klang Valley and sits well with its strategy to expand its exposure in the central region.

The group’s subsidiary, UEM Land Bhd, had entered into a sale and purchase agreement with Accolade Land Sdn Bhd to acquire a parcel of freehold land measuring 6.86 acres in Cheras for a purchase consideration of RM197mil.

UEM Sunrise is exploring a transit-oriented development on the land, which is aimed at young homeowners. Preliminary plans for the parcel is to develop 1.8 million sq ft of various types of competitively-priced products with an estimated gross development value (GDV) of RM1bil.

MIDF Research viewed the land acquisition favourably given that it would expand UEM Sunrise’s presence in Klang Valley.

The brokerage also pointed out that the land is strategically located adjacent to the Taman Connaught MRT station in Cheras. It deemed the land cost to GDV attractive at 19.7%.

The development is slated for a two-phase launch, with the first phase planned in the second half of 2022.

The latest landbank addition, according to PublicInvest Research, is consistent with the group’s strategy to expand its exposure in the central region.

To recap, it acquired three parcels of prime land in Section 13, Petaling Jaya on Jalan Professor Khoo Kay Kim for RM200mil in March 2021 and an 11.45-acre plot in Taman Pertama, Cheras in 2020.

“With the acquisition, its total landbank in the central region stands at circa 440.1 acres, amounting to an estimated total GDV of RM29bil.

“This addition is consistent with management’s strategy to rebalance its portfolio and increase its foothold in the Klang Valley, especially strategic land with quick turnaround, ” said PublicInvest in a report yesterday.

Recent moves saw the group lowering its exposure in Johor, including the disposal of its 170-acre industrial land to AME Elite for RM434mil, and the reduction of its stake in a firm developing 2, 500 acres of land in Kulai, Johor for RM183mil, while adding more development land in the central region.

While this may bode well for the company, the research house remains “neutral” on the stock with an unchanged target price of 55 sen, pegged at circa 75% discount to revalued net asset value (RNAV).

MIDF Research has also maintained its “neutral” recommendation in the stock for now as it sees limited earnings impact from the land acquisition in the near-term as the first phase will only be kicking off in the second half of 2022.

“Hence, we make no changes to our earnings forecast for FY21-FY22. Meanwhile, the impact on the balance sheet is expected to be minimal post land acquisition.

“We estimate the net gearing of UEM Sunrise to climb to 0.54 times from 0.51 times if UEM Sunrise were to fund the land acquisition via bank borrowings, ” it said.

It has an unchanged target price of 42 sen on the counter based on 80% discount to RNAV.

“We are ‘neutral’ on UEM Sunrise due to the weaker earnings visibility in the near term and limited upside, ” said MIDF Research.

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