April 10, 2012

UEM Land: Acquisition of a 122-acre land in Nusajaya

Stock Name: UEMLAND
Company Name: UEM LAND HOLDINGS BHD
Research House: ECMLIBRAPrice Call: HOLDTarget Price: 2.25




UEM Land Holdings' (UEML) (ULHB MK, Hold, TP: RM2.25) wholly-owned subsidiary, Nusajaya Premier Sdn Bhd, had entered into a conditional sale and purchase agreement (SPA) with TBV to acquire a 122.3-acre of land in Pulai, Johor Bahru for a total cash consideration of RM93.2m (RM17.50 psf). TBV is a wholly-owned subsidiary of Khazanah. The SPA is conditional upon the approvals being obtained from the Economic Planning Unit (EPU), Johor State Authority, Estate Land Board, and other relevant authorities. The land acquisition will be funded through existing cash balances, internally generated funds and/or borrowings. (Bursa Malaysia announcement)

Comment: Located in Nusajaya, the land is adjacent to Kota Iskandar-the Johor State Government's Administrative Centre, and Puteri Harbour. According to the Group's announcement, the land was previously disposed of to Khazanah as part of the de-gearing exercise of UEM World Berhad. UEML's re-acquisition of the land from parent Khazanah is part of its plans to consolidate land parcels which are in close proximity to the Puteri Harbour development. This would enable the Group to gain more control of the overall pace of development and property supply in Puteri Harbour.

We view the acquisition as a strategic move on UEML's part as demand and prices for residential properties in Nusajaya are expected to remain high largely due to the scheduled completion of several catalyst projects by the end of 2012 as well as strong interest from foreign investors. UEML plans to develop the land into a premier residential enclave featuring a mix of landed canal-front homes with individual berthing and high-end condominiums. This will be part of the existing Puteri Harbour township. The development is expected to start in 2013 for a period of 7 years. However, no financial details were given in the announcement as the proposed development and the SPA itself have yet to be finalised. The market valuation of RM17.50 psf was done by Knight Frank in October 2011 and is lower than our assumption of average RM40 psf (for lands in Nusajaya). We have to check with management on the particulars of this piece of land i.e. whether there are further conversion/infrastructure costs etc required before we come out with a company update. Meantime, we maintain our forecasts, target price and recommendation on UEML. (Azida Nor-Azizi)

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