UEM Land Holdings Bhd
(April 23,RM2.66)
Maintain trading buy at RM2.70 with a revised target price of RM3.23 (from RM2.97): UEM Land has entered into a sales and purchase agreement to dispose of two parcels of land in Puteri Harbour, TM 2 and TM 3, to Southern Marina Development Sdn Bhd.

TM 2 (9.9 acres or 3.96ha) and TM 3 (2.6 acres) will be sold for a total cash consideration of RM182 million, which translates into a price of RM334 per sq ft (psf).

The land sale is expected to contribute about RM182 million to revenue and RM81 million to earnings in 2013 financial year (FY13).

Three months ago, UEM Land disposed of two other parcels of land in the commercial North Precinct of Puteri Harbour to Liberty Bridge Sdn Bhd for RM400.8 million. In total, both deals will contribute RM583 million to the top line as well as RM261 million to the bottom line in FY13.

We believe the disposal price of RM334 psf is one of the highest transactions recorded in Puteri Habour. The price is higher than the recent sale to Liberty Bridge (297 psf in January this year), Encorp Bhd (RM180 psf in April 2010) and Tiong Nam Logistics (RM220 psf in June 2011) in Puteri Harbour.

The disposal will strengthen UEM Land’s balance sheet following a series of land sales (Liberty Bridge and Southern Marina) as well as the disposal of land to joint venture companies (Ascendas and Fast Track) with UEM Land taking a minority stake.

Southern Marina is jointly owned by Kuok Brothers Sdn Bhd and PPB Group Bhd. It will accelerate the development momentum in Puteri Harbour and the subsequent spillover effect will benefit UEM Land. UEM Land still owns a sizable landbank and projects in the pipeline within Nusajaya like D’Estuary, Residential North and Residential.

We are positive on the land disposal as UEM Land will be able to focus on projects of greater scale and reduce its exposure to the competitive high-rise developments in Puteri Harbour. We are revising upwards our FY13 earnings forecast by 9% after taking into account the disposal gain. We maintain our “trading buy” recommendation with a higher target price of RM3.23. We ascribe a price-earnings ratio (PER) of 25 times against FY13 earnings per share of 12.9 sen, which is 0.75 standard deviation below its three-year average PER of 32.6 times. — MIDF Research, April 23

This article first appeared in The Edge Financial Daily, on April 24, 2013.