Broker: Maybank Investment Bank Berhad
Date of Report: May 23, 2025

UEM Sunrise Q1 2025: Strong Start Driven by Land and Asset Sales, Outlook Solid Despite Economic Challenges

Executive Summary: UEM Sunrise’s Q1 2025 Financial Performance

UEM Sunrise Berhad (UEMS MK), a prominent Malaysian property developer, delivered a robust financial performance in the first quarter of 2025, driven by significant land and asset sales. Despite a quarter-on-quarter drop, the company’s core net profit surged year-on-year, setting the stage for potentially exceeding its full-year sales targets. The company remains a key proxy for the growing Johor-Singapore Special Economic Zone (JSSEZ), maintaining a positive outlook despite a cautious market environment.

Key Highlights and Analyst View

• 1Q25 Core Net Profit: MYR19 million (+1.4x YoY, -83% QoQ), in line with expectations.
• Strong Property Sales: MYR371 million, covering 35% of UEMS’s and 29% of Maybank’s FY25 sales targets.
• Target Price Revision: Reduced to MYR0.84 (from MYR1.01) to reflect slower economic conditions; still rated BUY.
• Major Sales Drivers: Land and car park asset sales contributed significantly to quarterly results.
• Unbilled Sales: Stood at MYR3.0 billion as of March 2025 (2.7x FY26E revenue).

Financial Results: A Closer Look at Q1 2025

The first quarter of 2025 saw UEM Sunrise report a core net profit of MYR19.2 million, representing 14% of Maybank’s and 19% of consensus full-year estimates. Notably, the drop in quarterly earnings versus 4Q24 was expected, as the previous quarter was buoyed by larger non-strategic land sales (MYR327 million) and stronger contributions from joint ventures and associates.

• Recognized Sales in 1Q25:
  • Land sales: MYR133 million
  • Car park sales: MYR40 million
• No dividend per share (DPS) was declared during the quarter.
• Net gearing: Remained steady at 0.4x, indicating prudent financial management.

Quarterly Financial Summary Table

Sales Momentum and Launch Pipeline

UEMS achieved property sales of MYR370.6 million in the first quarter alone—35% of its own MYR1.1 billion target and 29% of Maybank’s higher MYR1.3 billion forecast for FY25. Although this represents a 26% decrease year-on-year, momentum is expected to pick up as the year progresses.

• Planned New Launches (2Q–4Q25): MYR2.3 billion in gross development value (GDV)
  • 80% in Subiaco, Perth (Australia)
  • ~19% in Iskandar Puteri (Malaysia)
  • Remainder in Klang Valley (Malaysia)
• Unbilled sales as of March 2025: MYR3.0 billion (2.7x FY26E revenue)
• Sales target may be revised upwards in 2H25 depending on market conditions

Outlook: Earnings Forecasts and Valuation Adjustments

• FY25–27 Earnings Forecasts: Maintained at current levels, with FY25E sales assumption at MYR1.3 billion.
• Stronger 2H25 Expected:
  • Sales of retail units and over 1,400 car park lots in Mont Kiara
  • Recognition of MYR140 million land sale in East Ledang
  • The 74-acre land initially planned for a data center JV with Logos to be sold outright
• Valuation: Target price (TP) cut to MYR0.84 (from MYR1.01) using a 0.5x price-to-RNAV multiple, reflecting economic risks and consistent with sector valuations.

Key Financial and Valuation Metrics

RNAV Breakdown and Project Portfolio

The company’s portfolio spans a wide range of projects across Iskandar Puteri, Klang Valley, and international ventures in Australia, with the RNAV per share calculated at MYR1.68. The discounted target price is set at a 50% discount to RNAV.

• Total NPV: MYR1,614.7 million
• Shareholders’ Fund 2024: MYR6,867.9 million
• Total RNAV: MYR8,482.6 million
• RNAV per share: MYR1.68
• Target Price (50% discount): MYR0.84

Balance Sheet and Cash Flow Overview

• Total assets: MYR12,827.3 million (FY25E)
• Total liabilities: MYR5,792.6 million (FY25E)
• Shareholders’ equity: MYR6,921.9 million (FY25E)
• Net gearing (incl. perps): Projected to decrease from 45.7% in FY23 to 37.6% in FY25–27
• Free cash flow yield: 4.9% (FY25E)
• Dividend payout ratio: 60.1% (FY25–27E)

Risks and Investment Considerations

Potential risks to the investment outlook and earnings estimates include:

• Stronger or weaker property sales, particularly from Iskandar Malaysia projects
• Variation in land or asset sales volumes
• Performance of overseas property sales, especially in Melbourne

Stock and Shareholder Information

• Share Price (as of report date): MYR0.74
• 12-month Price Target: MYR0.84 (+14%)
• Issued Shares: 5,058 million
• Market Capitalisation: MYR3.7 billion (USD870 million)
• Major Shareholders:
  • Khazanah Nasional Bhd: 69.6%
  • Principal Asset Management (S) Pte Ltd.: 3.4%
  • AIA Bhd.: 2.4%
• 52-week High/Low: MYR1.23/MYR0.63
• 3M Avg Turnover: USD1.7 million
• Free Float: 27.2%

Price Performance and Analyst Recommendations

• Recent performance: -41% over 12 months, underperforming the Kuala Lumpur Composite Index
• Analyst Rating: BUY (return expected above 10% in the next 12 months, including dividends)
• Target price aligns with sector peers and reflects current economic uncertainties

Conclusion: UEM Sunrise’s Investment Case

UEM Sunrise has demonstrated resilience and adaptability through strong first-quarter sales, effective asset monetization, and a diversified development portfolio. Despite headwinds from the broader economic landscape, the outlook remains positive with potential for upward revisions in sales targets and earnings in the second half of 2025. The company’s strategic positioning in both domestic and international markets, healthy unbilled sales, and prudent balance sheet management support the BUY recommendation, with a revised target price of MYR0.84.