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Wednesday, February 17, 2016

PublicInvest retains Outperform on UEM Sunrise

KUALA LUMPUR: PublicInvest Research has maintained an "outperform" call on UEM Sunrise Bhd with a target price of RM2.15 following its latest proposed property venture.

UEM Sunrise had teamed up with Mulpha International Bhd to develop three parcels of land with a gross development value (GDV) of RM5bil near the Malaysia-Singapore second link in Iskandar Malaysia.

The companies have an equal share in a JV company to develop the multi-billion-ringgit project for up to 20 years.

"Earnings are kept unchanged as we believe the contributions from the JV will not be meaningful in the near term," PublicInvest said on Wednesday.

The research house said the base land price for UEM Sunrise land was RM315.2mil, or RM51.64 per sq feet, while Mulpha's land was valued at RM312.7mil, or RM78.70 per sq feet.

Hence, the JV is similar to the JV with KL Kepong in which minimal cash outlay is involved.

“UEM Sunrise might have to incur some costs in re-zoning the land and obtaining the approvals for the proposed density for the development.

"We are positive on the deal as this will expedite the development for Gerbang Nusajaya and also leverage on Mulpha’s strength in premium lifestyle development (Leisure Farm Resort)," PublicInvest said.

In addition, it said the land value fetched for UEM Sunrise was attractive (about 29% higher) when compared to the KLK JV. To recap, the 400-acre land swap with KLK was transacted at RM40 per sq feet back in 2014.

PublicInvest said UEM Sunrise and Mulpha would undertake mixed residential and commercial projects which included luxury landed villas, mixed-used development and neighbourhood retail shop projects.

The development period is 20 years with GDV estimated to be more than RM5bil.

"We understand that planning for the development will commence in second half 2016, with phase 1’s estimated GDV of RM150mil expected to be launched in 2018," it said.

The development of the land, which is located next to Leisure Farm resort, will be led by Mulpha and the remaining of the land near Gerbang Nusajaya, will be developed by UEM Sunrise.

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