UEM Sunrise announced that its indirect wholly-owned subsidiary, Lucky Bright Start Snd Bhd has on August 4, entered into an SPA with Nipponkey Sdn Bhd for acquisition of a parcel of freehold land situated at Jalan Sultan Yahya Petra (formerly known as Jalan Semarak) KL.
The total purchase consideration is RM384m. The land measures approximately 25,854 square metres or 6.39 acres and the acquisition is expected to be completed in 2HCY23.
The total purchase consideration of RM384m will be satisfied in cash of RM235.8m and in-kind of RM148.2m.
As part of the settlement of the purchase price via in-kind consideration, Nipponkey has entered into disposal and land transfer agreements with UEMS for land parcels totaling a net area of 107.82 acres located in Gerbang Nusajaya, Johor.
"We are neutral on the land acquisition and transfer of land as it is in line with UEMS strategy of rebalancing landbank portfolio. Meanwhile, the proposed development on the land at Jalan Sultan Yahya Petra is expected to have an estimated GDV of RM1.5b with development order (DO) obtained for development of shopping complex, hotel and serviced apartment. Land cost to GDV ratio of 25.6% deemed reasonable considering the prime location of the land in KL," says MIDF Research.
Muted earnings impact
The purchase consideration is expected to be funded via internal cash and bank borrowings. The land acquisition is expected to lift net gearing of UEMS marginally to 0.54x from 0.5x as of 1QFY22.
Meanwhile, earnings impact from the land acquisition is muted as project on the land is expected to launch in 2024 with development period of 4 years.
Unchanged TP of RM0.34
"Hence, we make no changes to our earnings forecast for FY22/23.
"We make no changes to our RNAV valuation, pending completion of the land acquisition. Our TP is unchanged at RM0.34, based on 84% discount to RNAV. We are maintaining our NEUTRAL call on UEM Sunrise as we see tepid new sales outlook and lack of catalyst for UEMS," says the analyst firm.