Likely To Miss Earnings KPI

Transcription

1 UEM Sunrise Likely To Miss Earnings KPI By Sarah Lim l sarahlim@kenanga.com.my MARKET PERFORM Last Price: RM1.18 Target Price: RM1.28 Period Actual vs. Expectations Dividends Key Results Highlights Outlook Change to Forecast Rating Valuation Risks 3Q15/9M15 9M15 core earnings of RM185m came in below expectations, making up 50% of street s FY15 estimates and 48% of ours, due to slower-than-expected project billings and margin compressions arising from higher overheads costs (possibly marketing costs). 9M15 sales of RM1.18b accounted for 59% of our FY15 target of RM2.0b (also UEMS base target); however, this is broadly inline as we expect more sales from The Conservatory@Melbourne to be felt in 4Q15 (refer overleaf) None, as expected QoQ, core earnings fell by 43% on the back of a 14.7ppt compression in pretax margins. Last quarter had a highbase effect as it saw one-off recognition of other income 1 ; stripping this out from last quarter, 3Q15 core earnings would have fallen milder by c.20% even though 3Q15 saw very low effect tax rates of <1% 2. We reckon that there was recognition of a lower product margin mix while billings were softer. YoY, 9M15 was down by 11%, inline with revenue decreasing by 13% given less billings on the back of weaker historical local sales trends and weaker contributions from associates/jce (-29%). The group is comfortable with keeping to their FY15E base sales target of RM2.0b on more sales from The Conservatory, Aurora, sale of Imperia. However, earnings target of RM500m may not be achievable as some strategic land sale deals will take longer to materialize; revised earnings target was not provided. Privatisation rumours have kept its share prices buoyant, but there is no confirmation yet. We think privatisation is unlikely in the near-term because keeping the entity listed would allow UEMS to raise money when landbanking opportunities arise (e.g. in Australia, Klang Valley) as the group aims to diversify out of Johor. If the group go for any sizeable acquisitions in the Klang Valley or Australia, we believe that cash-calls may be possible. Their net gearing has inched up to 0.32x. Lowering FY15-16E core earnings by 35-30% (refer overleaf). Unrecognized revenue of RM4.06b provides two years visibility. Maintain MARKET PERFORM Lower TP to RM1.28 based on wider discount of 70% on FD RNAV of RM4.27 (TP of RM1.38 based on 68% discount previously) largely due to management not being able to meeting their earlier earnings target guidance. Our discount rate is steeper than our big-cap developers average of 48% while we prefer to peg it at - 1SD levels due to its high exposure in Johor while we see no near-term catalyst. We also see no near-term catalysts to re-rate the stock, other than the privatisation rumours, which we reckon is unlikely. (i) Balance sheet risk, (ii) weaker-than-expected property sales, (iii) higher-than-expected sales and administrative costs, (iv) negative real estate policies, and (v) tighter lending environment. Share Price Performance KLCI 1, YTD KLCI chg -4.4% YTD stock price chg -16.3% Stock Information Shariah Compliant Yes Bloomberg Ticker UEMS MK Equity Market Cap (RM m) 5,354.2 Issued units 4, week range (H) week range (L) mth avg daily vol: 21,632,670 Free Float 26% Beta 1.0 Major Shareholders KHAZANAH NASIONAL BH 66.1% LEMBAGA TABUNG HAJI 6.8% VANGUARD GROUP INC 1.0% Summary Earnings Table FY Dec (RM m) 2014A 2015E 2016E Turnover 2,662 1,606 1,865 EBIT PBT Net Profit (NP) Core Profit Consensus (CNP) n.a Earnings Revision n.a % Core EPS (sen) EPS growth (%) -48% 21% NDPS (sen) NTA/Share (RM) Core PER (x) Price/NTA (x) Net Gearing (x) Dividend Yield (%) % 2.1% PP7004/02/2013(031762) Page 1 of 6

2 OTHER POINTS 9M15 sales of RM1.18b is broadly in-line. 9M15 sales accounted for 59% of our FY15 target of RM2.0b (also UEMS base target) but we deem this as broadly inline as we expect more sales from The to be felt in 4Q15. Australia (Aurora, Conservatory) continues to be the main driver (48%) and Klang Valley (37%, main drivers Residensi 22, Sefina, Serene Heights, Symphony Hills). Lowering FY15-16E core earnings by 35-30%. While we maintained our sales estimates, we have deferred our recognition assumptions towards future years. We have also trimmed margins on the back of higher overheads (particularly marketing) expenses. Note that we have not forecasted for any land sales other than SiLC Ph3 which is recognized progressively. 1 2Q15 one-off other income was from: (i) dividend distribution receivable from an old project under creditor s voluntary liquidation, and (ii) LAD or recognition of liquidated ascertained damages from a contractor. 2 Note that the effective tax in 3Q15 was <1% due to over provisioning of current tax in the prior quarter arising from the nontaxable dividend distribution from the subsidiary under liquidation. 9M15 Sales and Revenue Composition Serene Heights East YTD Sales 9M15 Ledang 1% Nusa Idaman 2% Estuari 0% Conservatory 2 Aurora Melbourne Central 23% Source: Company, Kenanga Research Nusa Bayu 4% Symphony Hills, Cyberjaya Sefina 13% Residensi 22 12% Almas 3% Summer Suites 1% Arcoris, MK 1% Quintet, Canada Project Management 1% FM & Others 2% Property Investment (Turnkey Dev) Revenue Composition 9M15 Property Development - Non-Nusajaya 4 Property Development - Nusajaya 4 Strategic Land Sales 2% Results Highlights FYE: 31st Dec (RMm) Revenue Op costs w/o depn/amort Other Op Income EBITDA EBIT Net interest Associate + JCE Pretax profit Taxation Minority Interests Net profit Core net profit (incl. Land Sales) EPS (sen) Diluted EPS (sen) DPS (sen) NTA/share (RM) Net gearing/(cash) (x) EBITDA margin 3Q15 2Q15 QoQ 3Q14 YoY 9M15 9M14 YoY , , % (328.7) (320.8) 2% (404.0) -19% (1,019.0) (1,138.2) -10% % % % % % % % % % (19.0) (22.3) -1 (18.7) 1% (53.9) (36.9) 46% % % % % % % (0.4) (21.4) -98% (17.1) -98% (33.7) (52.5) -36% % % % % % % % % % % % % % n.a. 0.0 n.a n.a % % % % 26.6% 16.9% 17.9% 16. EBIT margin 12.1% 26.6% 15.7% 17.9% 15.2% Pretax margin 13.6% 28.3% 18.8% 19.1% 19.7% Effective tax rate -0.7% -20.3% -19.3% 15.4% 20.2% PP7004/02/2013(031762) Page 2 of 6

3 FD RNAV Projects and Landbanks Stake Duration Start Remaining GDV Remaining Net WACC (yrs) Profit *** (%) On-going Projects Remaining + Unbilled East Ledang 100% 6.0 FY13 1, % 388 Nusa Idaman 100% 3.0 FY % 93 Nusa Bayu 100% 4.0 FY % 97 Imperia 100% 1.0 FY % 206 Teega 100% 3.0 FY % 194 Mall of Medini FY13 1, % 139 Horizon Hills 50% 7.0 FY13 4, % 490 Symphony Hills 100% 6.0 FY % 135 Arcoris 100% 3.0 FY % 147 Summer Suites & VOS 100% 2.0 FY % 74 Quintet 100% 2.0 FY % 99 Seremban Forest Heights 50% 8.0 FY % 66 Pipeline Projects Iskandar Malaysia Gerbang Nusajaya 100% 15.0 FY16 27,103 7,589 10% 2,784 D'Estuary 100% 6.0 FY13 5,987 1,676 10% 1,201 R10/R11 100% 3.0 FY % 32 Parcel I6 100% 2.0 FY % 23 CS1 100% 3.0 FY14 1, % 297 Residential South 80% 4.0 FY14 3, % 502 CS3 - Puteri Harbour 50% 3.0 FY % 83 Residential North 40% 4.0 FY13 2, % 241 DCF Value (RM m) *** Gerbang Nusajaya - Eco-Industrial 40% 5.0 FY14 3, % 228 Park Gerbang Nusajaya - Motorsports 30% 5.0 FY14 3, % 181 City Desaru 51% 10.0 FY17 10,460 1,280 10% 519 Puteri Harbour (Land earmarked for 100% 3.0 FY15 9,015 2,524 10% 1,702 'catalytic development' KLK-UEMS Gerbang 40% 8.0 FY16 5, % 234 Nusajaya Fraser Senai-Skudai 60% 15.0 FY17 15,000 2,520 10% 837 Outside Nusajaya Sinaran Hills, Kajang 100% 6.0 FY % 87 MK % 4.0 FY % 221 Angkasa Raya 100% 6.0 FY15 1, % 299 Bangi Land 100% 8.0 FY13 2, % 570 Floresta - Solaris 3 62% 6.0 FY14 1, % 220 Jelutong Commercial Centre 50% 6.0 FY16 1, % 93 La Trobe & Melbourne CBD & St Kilda Melbourne 100% 6.0 FY14 3, % 320 Catalyst Developments (Potential JVs or outright land sales) Land size (ac) NBV Mkt Value Mkt Value (RM psf) SiLC 100% Afiat Healthpark 100% Other landbanks Land size NBV Mkt Value Mkt Value (RM psf) (ac) Surplus/ (Deficit) *** Surplus/ (Deficit) *** Nusajaya Regional Open Space 100% Others 100% Outside Nusajaya Klang Valley 100% Mersing 100% Tapah 100% 2, Canada 100% NBV Mkt Value Implied Cap Rates Surplus/ (Deficit) *** Investment Properties 100% % 256 Revised Asset Value 15,163 Gains on Disposal of Gerbang 171 Nusajaya Land to UEMS-KLK JV Subscription by UEM Group 785 Shareholders 31/12/13 6,019 RNAV 22,138 Dilution Impact 590 FD RNAV per share (RM) MYR 4.27 Diluted No of shares ('m) 5,323 Applied Discount (%) -70% Target Price (RM) MYR 1.28 *** Effective Stake PP7004/02/2013(031762) Page 3 of 6

4 Income Statement Financial Data & Ratios FY Dec (RM m) 2012A 2013A 2014E 2015E 2016E FY Dec (RM m) 2012A 2013A 2014E 2015E 2016E Revenue Growth (%) EBITDA Revenue Depreciation EBITDA EBIT EBIT Interest Expense Pre-tax Income Investing Net Income Associate/JCE Core Net Income Exceptionals/FV PBT Profitability (%) Taxation EBITDA Margin Minority Interest EBIT Margin Net Profit PBT Margin Core Profit Net Margin Effective Tax Rate Balance Sheet ROE FY Dec (RM m) 2012A 2013A 2014E 2015E 2016E ROA Fixed Assets Intangibles Other FA DuPont Analysis Inventories Net margin (%) Receivables Assets Turnover (x) Other CA Leverage Factor (x) Cash ROE (%) Total Assets Leverage Payables Debt/Asset (x) ST Borrowings Debt/Equity (x) Other ST Liability Net Debt/(Cash) LT Borrowings Net Debt/Equity (x) Other LT Liability Minority Int Valuations Net Assets Core EPS (sen) NDPS (sen) Share Capital NTA/sh (RM) Reserves Core PER (x) Shareholders Equity Net Div. Yield (%) PNTA (x) Cashflow Statement EV/EBITDA (x) FY Dec (RM m) 2012A 2013A 2014E 2015E 2016E Operating CF Investing CF Financing CF Net Change in Cash Free Cash Flow * Note our core earnings does include land sales but excludes one-off or non-cash items. Fwd Core PER Band Fwd PBV Band Source: Bloomberg, Kenanga Research PP7004/02/2013(031762) Page 4 of 6

5 Peer Comparison NAME Price (26/11/15) Mkt Cap PER (x) Est. NDiv. Yld. Historical ROE P/BV Net Profit (RMm) FY15/16 NP Growth FY16/17 NP Growth (RM) (RMm) FY14/15 FY15/16 FY16/17 (%) (%) (x) FY14/15 FY15/16 FY16/17 (%) (%) (RM) Target Price Rating DEVELOPERS UNDER COVERAGE S P SETIA BHD* , % 7.1% % 13.4% 3.50 MARKET PERFORM IOI PROPERTIES GROUP BHD* , % 3.9% % 2.09 MARKET PERFORM UEM SUNRISE BHD* , % 7.8% % 20.8% 1.28 MARKET PERFORM SUNWAY BHD , % 13.2% % -13.6% 3.27 MARKET PERFORM MAH SING GROUP BHD^ , % 16.1% % 4.3% 1.47 MARKET PERFORM ECO WORLD DEVELOPMENT GROUP BHD , % 2.2% % OUTPERFORM UOA DEVELOPMENT BHD* , % 12.2% % 7.4% 2.22 OUTPERFORM MALAYSIAN RESOURCES CORP BHD , % 2.6% % 131.9% 1.63 MARKET PERFORM KSL HOLDINGS BHD , % 15.3% % 1.8% 1.72 OUTPERFORM TROPICANA CORP BHD , % 11.9% % -29.9% 0.99 MARKET PERFORM MATRIX CONCEPTS HOLDINGS BHD , % % -18.2% 2.46 MARKET PERFORM CRESCENDO CORPORATION BHD* % 15.3% % 6.3% 1.90 UNDERPERFORM HUA YANG BHD % 25.9% % 3.3% 2.20 OUTPERFORM CREST BUILDER HOLDINGS BHD % 8.9% % 23.8% 1.10 MARKET PERFORM CONSENSUS NUMBERS IGB CORPORATION BHD , % 4.9% % 4.10 NEUTRAL YNH PROPERTY BHD % 2.8% % 34.1% 1.48 SELL GLOMAC BHD % 9.3% % 10.8% 1.01 BUY PARAMOUNT CORP BHD % 7.7% % 5.6% 2.40 BUY TAMBUN INDAH LAND BHD % 25.6% % -0.9% 1.62 BUY * Core NP and Core PER ** Crescendo per share data is based on non-fully Diluted ^ Last price and TP is Ex-rights and Ex-Bonus. PP7004/02/2013(031762) Page 5 of 6

6 Stock Ratings are defined as follows: Stock Recommendations OUTPERFORM :A particular stock s Expected Total Return is MORE than 10% (an approximation to the 5-year annualised Total Return of FBMKLCI of 10.2%). MARKET PERFORM :A particular stock s Expected Total Return is WITHIN the range of 3% to 10%. UNDERPERFORM :A particular stock s Expected Total Return is LESS than 3% (an approximation to the 12-month Fixed Deposit Rate of 3.1 as a proxy to Risk-Free Rate). Sector Recommendations*** OVERWEIGHT :A particular sector s Expected Total Return is MORE than 10% (an approximation to the 5-year annualised Total Return of FBMKLCI of 10.2%). NEUTRAL :A particular sector sexpected Total Return is WITHIN the range of 3% to 10%. UNDERWEIGHT :A particular sector sexpected Total Return is LESS than 3% (an approximation tothe 12-month Fixed Deposit Rate of 3.1 as a proxy to Risk-Free Rate). ***Sector recommendations are defined based on market capitalisation weighted average expected total return for stocks under our coverage. This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. Published and printed by: KENANGA INVESTMENT BANK BERHAD (15678-H) 8th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia Telephone: (603) Facsimile: (603) Website: Chan Ken Yew Head of Research PP7004/02/2013(031762) Page 6 of 6