PETALING JAYA: UEM Sunrise Bhd
is expected to unlock significant value from its prime Jalan Ampang land through a capital-light development rights arrangement (DRA) with property developer Exsim KLCC Sdn Bhd.
Hong Leong Investment Bank (HLIB) Research said the structure would allow UEM Sunrise to monetise the asset while avoiding the substantial capital commitment and execution risks associated with undertaking the project itself.
UEM Sunrise has entered into a strategic partnership to develop its 1.6-acre freehold land known as Lot 149, located at the junction of Jalan Ampang and Jalan P Ramlee in Kuala Lumpur City Centre, under a DRA that guarantees the property developer an entitlement of RM415mil.
Under the agreement, UEM Sunrise will grant EXSIM KLCC the rights to undertake and complete the development of the prime site.
Besides the guaranteed entitlement, the DRA also includes a profit-sharing mechanism that allows UEM Sunrise to participate in the project’s future upside.
“Against this backdrop, we view the DRA structure positively.
“The guaranteed entitlement represents a 29% premium to the land’s net book value of RM320.7mil, enabling the group to recognise a meaningful gain from the transaction,” HLIB Research said in a note.
According to the research house, the deal came at an opportune time, as the high-end residential market is recovering, supported by improving foreign demand for prime KL properties, which allows UEM Sunrise to crystallise value on more favourable terms. It noted that the property group has at least five high-rise projects in the pipeline over the next two years, including MAIA in Mont Kiara, the Dutch Lady land, Connaught Two, the Kelana Jaya land and a new phase in Kiara Bay.
“In our view, UEM Sunrise has effectively capitalised on the improving market backdrop to unlock value from a prime but idle landbank, while preserving balance sheet flexibility for these higher-priority projects,” HLIB Research added.
Should UEM Sunrise have undertaken the development itself given the site’s prime location?
HLIB Research estimates the proposed mixed-use development could have a gross development value of close to RM2bil.
“Hence, a project at this sizeable scale would entail sizeable development capital expenditure and execution risk.
“To command such premium pricing, the project would need to be highly differentiated, including securing the right hotel and retail operators, as well as delivering a premium branded residence concept and layout.
“As the project is a niche and new product segment, this would require significant management time, specialised expertise and additional resources from UEM Sunrise,” said HLIB Research.
“Under the DRA, the group will receive the RM415mil in stages.
“UEM Sunrise is expected to recognise a net gain of RM66mil in financial year 2026 (FY26) from this DRA. Maintain ‘buy’ with an unchanged target price of RM0.92.”
Meanwhile, Public Investment Bank Research said the land monetisation exercise would strengthen UEM Sunrise’s balance sheet by freeing up cash to reduce borrowings while providing additional working capital to support its ongoing and upcoming developments.
Despite this, the research ho maintained its “neutral” recommendation with a 60 sen target price, citing fairly valued share prices.
The valuation is pegged at about 0.4 times book value, in line with the stock’s five-year average discount to book.
Its shares traded at 63 sen, up 14.5% year-to-date.
An analyst said the development was an early validation of UEM Sunrise’s strategic direction under its new leadership team.
He said the group remains on a positive growth trajectory, supporting initiatives such as the revival of its Melbourne project and efforts to rejuvenate Puteri Harbour in Iskandar Puteri, Johor.
