Broker: Maybank Investment Bank Berhad
Date of Report: August 22, 2025

UEM Sunrise: On Track for Growth Despite Margins Squeeze – A Comprehensive Financial Review

Overview: UEM Sunrise’s 2Q25 Performance and Investment Outlook

UEM Sunrise Berhad (UEMS MK), a key player in Malaysia’s real estate sector and a renowned proxy for the Johor-Singapore Special Economic Zone (JSSEZ) development, continues to be a favored pick among property investors. Despite a shortfall in profits for the second quarter of 2025, the company’s sales performance remains robust, keeping it on track to achieve, and potentially exceed, its annual targets. Maybank Investment Bank reiterates a BUY call, maintaining a target price (TP) of MYR0.84, implying a 10% upside from the current price of MYR0.76.

2Q25 Results: Solid Sales, Margins Under Pressure

UEM Sunrise posted a core net profit of MYR23.8 million for 2Q25, marking a 2.6x increase year-on-year and a 24% rise quarter-on-quarter. However, this result fell below both Maybank and consensus expectations, primarily due to lower-than-anticipated margins from the Tapah land sale. The company’s 1H25 core net profit reached MYR43 million, a significant rebound from a MYR7 million core net loss in 1H24. Despite the earnings shortfall, property sales hit MYR649.3 million in 1H25, representing 61% of UEMS’s FY25 sales target and 50% of Maybank’s own assumption.

Key drivers of the quarter included:

• Completion of an MYR80 million Tapah land sale, albeit with lower-than-expected margins
• Secured sale of 38 stratified retail units and 1,432 car park bays at Arcoris to Sentral REIT for MYR70 million, expected to complete by 4Q25
• Net gearing remained stable at 0.4x by end-2Q25

Strong Sales Execution and Future Launches

UEM Sunrise’s sales momentum remains intact. Major highlights:

• 1H25 property sales of MYR649.3 million achieved 61% of company and 50% of Maybank’s FY25 sales targets
• MYR1.6 billion in planned launches for 2H25, including the One Oval, Subi East project in Perth (GDV: MYR1.35 billion)
• Plans to bring forward new launches in Iskandar Puteri from FY27 to FY26, capitalizing on robust JSSEZ demand
• Aspira Hills project saw nearly full take-up for non-bumi lots at ASP of MYR820k–840k/unit

Financial Forecasts and Valuation: Adjustments and Risks

Maybank has revised its FY25 earnings estimate downward by 13%, accounting for:

• Lower blended margins for land sales (15% from 25%), despite a higher land sale volume assumption (MYR354 million, +18%)
• Lower gains from the Arcoris retail units and car park sale

Nevertheless, FY26 and FY27 forecasts remain unchanged, with unbilled sales at an impressive MYR3 billion (2.7x FY26E revenue).

RNAV Valuation: Significant Upside Potential

Maybank’s revised target price is based on a 50% discount to UEM Sunrise’s estimated RNAV per share of MYR1.68. The company’s vast landbank, particularly in Iskandar Puteri and the Klang Valley, underpins its long-term growth prospects. As of 2024, the total RNAV stands at MYR8,482.6 million, with shareholders’ funds at MYR6,867.9 million and 5,058 million shares issued.

Key Projects and Landbanks

• Iskandar Puteri: Major developments such as East Ledang, Estuari Puteri Harbour, and Gerbang Nusajaya
• Klang Valley: Projects include Serene Heights, Solaris Parq, The MINH, The Connaught One, and joint ventures like Kiara Bay, Kepong
• International: Subiaco in Perth and Collingwood

Key Metrics and Ratios: Financial Health Check

UEM Sunrise’s financial metrics underscore a company on an improving trajectory:

• FY25 Core P/E: 32.5x (projected to fall to 20.3x by FY27)
• Net dividend yield rising from 0.9% (FY23) to a projected 3.0% (FY27)
• ROAE expected to climb from 1.1% (FY23) to 2.7% (FY27)
• Stable net gearing, declining from 45.7% (FY23) to 38.0% (FY27)
• FCF yield expected to remain healthy, averaging above 4% through FY27

Risks to Outlook

Investors should note potential risks that could impact UEMS’s earnings and valuation:

• Stronger or weaker than expected property sales, especially from Iskandar Malaysia projects
• Higher or lower than expected land/asset sales
• Overseas property sales performance, particularly in Melbourne

Shareholder Structure and Market Performance

UEM Sunrise is majority-owned by Khazanah Nasional Bhd. (69.6%), with other notable institutional shareholders including Principal Asset Management (3.4%) and Urusharta Jamaah Sdn. Bhd. (3.1%). The company’s market capitalization stands at MYR3.8 billion (USD910 million), with a 52-week share price range of MYR0.63–1.17.

Conclusion: UEM Sunrise Poised for Long-Term Upside

Despite a temporary margin squeeze in 2Q25, UEM Sunrise remains on a solid growth path, driven by strong sales execution, a deep development pipeline, and significant landbank value. With an undemanding valuation, improving profitability metrics, and a strategic position in the JSSEZ, UEM Sunrise offers a compelling investment case for those seeking exposure to Malaysia’s property upcycle.

About the Analyst

Wong Wei Sum, CFA Maybank Investment Bank Berhad Contact: [email protected] | +603 2297 8679

Company Description

UEM Sunrise Berhad is principally involved in property development, with a focus on large-scale township developments in Iskandar Puteri, Johor, and the Klang Valley, as well as select international projects in Australia.
For further details or personalized investment advice, investors are encouraged to consult with their financial advisors.