UEM Sunrise Bhd kicked off its financial year with a first-quarter core net profit of RM19.9 million, a sharp 80% drop quarter-on-quarter but a substantial 330% increase year-on-year, according to a research note by CGS International.
The result was broadly within expectations, meeting 22% of CGS’s full-year forecast but falling short of Bloomberg consensus at 17%. The sequential earnings decline was attributed to weaker revenue of RM417.6 million (-23% qoq, +86% yoy) and reduced profit contributions from associates and joint ventures. Land sales revenue also slipped to RM133.5 million from RM152.2 million in the preceding quarter.
On Track with Sales Target, Despite Setbacks
Despite the soft earnings, UEM Sunrise appears to be making solid progress towards its FY25 sales goal of RM1.05 billion. In the first quarter alone, the group secured RM371 million in new property sales — a 59% increase year-on-year — representing 35% of its full-year target. However, this target is 26% lower than in FY24, primarily due to anticipated lower contributions from its Central region projects.
Management, however, did confirm that the Q1 figures included RM40 million from car park lot sales in Solaris Mont’Kiara, with additional sales expected in 2Q from Arcoris Mont’Kiara.
While no new projects were launched in Q1, the company is maintaining its target to roll out RM2 billion worth of new developments over the remaining quarters of FY25. One anticipated launch, the One Oval project in Perth, has been delayed to the second half of the year.
A major disappointment, however, was the termination of a planned data centre (DC) development partnership with Logos on a 74-acre site in Gerbang Nusajaya, Johor. The decision was made due to what the company cited as an “unfavourable operating environment.”
Still, momentum is building in Johor, with the opening of a new sales gallery in Iskandar Puteri and progress on the Gerbang Nusajaya Industrial Master Plan, pending regulatory approvals.
Valuation Adjusted, Rating Upgraded
In light of the DC venture termination and project launch delays, CGS International has trimmed its target price for UEM Sunrise to RM0.76 from RM0.83, based on a 60% discount to its revised net asset value (RNAV).
Nonetheless, the research firm upgraded the stock from “Reduce” to “Hold,” stating that recent share price corrections have already factored in the setbacks. The stock is now trading at 0.5 times projected FY25 price-to-book value, compared to the sector average of 0.7 times — a discount attributed to its sizeable landbank.
Downside risks include weak earnings delivery and slow take-up of ongoing projects. On the upside, monetisation of landbank assets and stronger-than-expected sales performance could provide a boost.
With planned launches still on the cards and operations in Johor gaining traction, UEM Sunrise is positioning itself for a steadier second half, albeit amid lingering uncertainties.
