With regards to the land deal at Jalan Semarak falling through for UEM Sunrise, MIDF views the latest development positively. Previously, the house said it was concerned about the developer’s involvement in the highly-competitive and over-supplied retail/office/hotel segments with the acquisition of the Jalan Semarak project.
In this aspect, MIDF has not changed its earnings forecasts as it has yet to factor the project into the projections.
UEM Sunrose said the land purchase at Jalan Semarak has fallen through after conditions precedent under the SPA were not met within the conditional period, which expired on 7 Feb 2023. To recap, UEMS had entered into a SPA with Nipponkey S/B to acquire 6.4 acres of freehold land situated at Lot 228, Jalan Sultan Yahya Petra (formerly known as Jalan Semarak) for MYR384m. The purchase cost will be satisfied in MYR235.8m cash and MYR148.2m in kind involving 107.8 acres of land (next to Nusajaya Techpark) in Gerbang Nusajaya, Iskandar Puteri, Johor.
MIDF did mention in its previous reports dated 5 Aug 2022 and 8 Aug 2022, the proposed land acquisition came with planning approval for a mixed commercial development involving a shopping complex, offices, hotel rooms, and service apartments. While the new land allows UEMS to reduce its exposure in Iskandar Malaysia (IM) and has a shorter development period (as compared to IM), we were concerned about its involvement in the highly competitive and over-supplied retail/office/hotel segments. UEMS might also face stiff competition from nearby high-rise projects (e.g. Platinum Splendor Residensi).
UEMS currently trades at 0.2x/0.2x P/BV and P/RNAV respectively. Foreign shareholding was 5.2% as of Dec 2022.MIDF maintains a hold call on the stock at a target price of MYR0.23.
