UEM Sunrise Bhd's plan to launch The Minh in Mont Kiara and The Connaught One in Taman Connaught, Cheras this year, both of which have a combined gross development value (GDV) of RM1.69 billion has been pushed to the first half of 2023 (1H2023).
The Minh with a GDV of RM950 million (plot 1 of MK 31) and The Connaught One with a GDV of RM740 million (1st phase) were scheduled to launch in the current quarter, according to KAF Research.
According to the firm, the management of UEM Sunrise disclosed during the most recent result briefing that there are delays in obtaining authorities' approval for the two projects
It said that the Minh will now launch in the 1QCY23, followed by The Connaught One in the 2QCY23.
"Taking the delays into consideration, the management indicated that actual sales could come well behind the RM1.5 billion target," it said in a recent note.
UEM Sunrise achieved sales of about RM736 million for the nine months that ended on September 30, 2022 (9M2022), or 49 per cent of the management's FY2022 presales target of RM1.5 billion.
KAF said the total sales secured so far are in line with the firm's FY2022 pre-sales target of RM1 billion.
KAF: Attractive valuation but short-term uncertainty remains
KAF said being among the largest developers that are trading at among the steepest discount (under the research firm's coverage) at more than 85 per cent discount to its RNAV of RM1.49, it views UEM Sunrise to be attractive.
However, the developer's short-term outlook remains uncertain with its low earnings visibility, it noted.
"The outlook is challenging for the company due to the persistent labour shortage, weakening ringgit, tightening monetary policy and supply-demand imbalance will continue to dampen potential buyers' sentiment.
"Hence, we maintain our Hold recommendation on UEM Sunrise with a reduced target price of RM0.22 (from RM0.30), based on a higher 85 per cent discount (from 80 per cent discount) to the company's RNAV. We do not foresee any major catalyst in the near-term that could lead to the stock re-rating," KAF said.
UEM Sunrise reported core earnings of RM59 million for 9M2022, an improvement from a net core loss of RM63 million for the same period last year.
KAF said this is ahead of the firm's and consensus expectations, making up c.123 per cent (consensus: c.158 per cent) of its initial core earnings forecast in FY22F at RM48 million.
The strong earnings were mainly supported by strong contributions from its joint venture and land sales.
However, KAF believes UEM Sunrise's net gearing would likely increase as it gears up for more land acquisitions in its effort to reprofile its landbank towards the central region.
"The management is committed to disposing of its non-core assets (such as) pocket lands, to pare down its borrowing/replenishing its cash. However, we believe that land disposal is not an easy task and would take time to do so," the firm noted.