KUALA LUMPUR: RHB Research rated UEM Sunrise Bhd (UEMS) a 'trading buy' with the High Speed Rail project tipped to be the stock’s near-term catalyst.
"UEMS’ second quarter 2014 results came in below expectations. First half sales achieved RM439 million, but management cut
its financial year (FY) 2014 sales target to RM2 billion given the slow sales momentum year to date.
"As such, we lower our FY 2014-2015 forward earnings forecasts by 7-10 per cent and reduce our fair value to RM2.52 from RM2.73.
"UEMS second quarter results missed its and market expectations again, making up only 23 per cent and 25 per cent of its and consensus estimates respectively," said RHB in its report today.
RHB noted that apart from the lack of developed land sales, the higher progress billings from the property development division was offset by the cost revision on certain projects arising from the potential goods and services tax (GST) impact.
"Management stated that this is not a recurring item. Second quarter property sales achieved RM316 million versus RM123 million in first quarter of 2014.
"Residensi 22 was the key contributor (RM205.5 million), followed by Almas in Puteri Harbour (RM60.2 million), which saw a take-up rate of only 20 per cent.
"In view of the challenging market conditions and slow sales momentum, management slashed its FY 2014 sales target by 37.5 per cent to RM2 billion from RM3.2 billion.
"Mid-end homes that suit the market conditions are prioritised, with Serene Heights in Bangi and new phases in Nusa Bayu and Nusa Idaman set to be launched in H2.
"The only higher-end product that UEMS plans to roll out is the superlink homes in D’Estuary, Nusajaya. Meanwhile, it plans to launch its Melbourne project in La Trobe Street with a AUD730 million gross development value (GDV) in October given the encouraging current market demand there."
RHB said in view of the weak first half results and slower sales, it lowered the FY 2014-2015 forward earnings forecasts by about 7-10 per cent.
"The gain on land sales to Kuala Lumpur Kepong and Fastrack Iskandar Sdn Bhd (for Motorsport City land) – which will be recognised in second half – should make up for the earnings shortfall. Meanwhile, unbilled sales remained steady at RM4.22 billion versus RM4.4 billion in first quarter."