KUALA LUMPUR: The recent disposal of land by UEM Sunrise Bhd further accelerates the monetisation of its remaining undeveloped landbank in Johor Bahru, which will allow the group to focus on existing projects with better market prospects.

       Last Friday, the developer entered into three sale and purchase agreements with Lagenda Mersing Sdn Bhd, a 70%-owned unit of Lagenda Properties Bhd, to dispose of three parcels of freehold agriculture land measuring 431.1 acres in Mersing, Johor for a total consideration of RM45.1mil.

       This follows UEM’s disposal of 623.1 acres of land in Tapah, Perak last August for a consideration of RM29.9mil.

       This is in line with the company’s strategy of disposing of non-core landbanks and refocusing its resources on core projects. Analysts view this development positively given its direct impact on the group’s pre-tax profit.

       “Our revalued net asset value (RNAV) has been marginally raised by 0.2%, or RM13mil, to RM5.4bil from the estimated gains arising from UEM’s conditional agreement to sell three parcels of freehold agriculture land measuring 431.1 acres in Mersing.

       “Our core earnings forecasts are unchanged for now pending the completion of the deal with the major portion of sale proceeds expected to be received over the next 10 months.

       “As we understand that the land sale could generate a pre-tax margin of 40%, we estimate that the net gain of RM13mil could raise our financial year (FY) 2022 net profit by 15%, ” said AmInvestment Bank in a report yesterday.

       The research house also noted the possibility that the group may use proceeds from the deals for landbanking activities and to repay borrowings.This could slightly improve FY22’s net gearing from 44% to 43%.

       Upon the completion of the disposal, the group’s total remaining undeveloped landbank will contract by 16% to 2, 245 acres from 2, 677 acres as at April 30, 2021. It currently has 23 ongoing projects, 70% of which are based in Johor Baru.

       The transactions, notably, underscore UEM’s plan to reduce its exposure in Johor.

       However, Maybank IB Research opined that the selling price of the three parcels of land at about RM2.40 per sq ft appeared to be on the low side compared to the asking prices of RM3.80-RM6.51 per sq ft in that area.

       As such, Maybank IB has maintained its “hold” rating on the stock with unchanged earnings forecasts and target price of 43 sen.

       Although positive on the deals, AmInvestment Bank Research has also kept its “hold” call on UEM with unchanged fair value of 43 sen given the uncertainty in the company’s short-term outlook as longer movement restrictions could lead to slower-than-expected earnings recovery from its Q1FY21 loss of RM4mil.

       “Currently, UEM’s valuation is excessive at FY22F price earnings (PE) of 22 times versus an average FY22F PE of 14 times for property stocks under our coverage, ” the brokerage said.

       On the other hand, AmInvestment favours Lagenda Properties as a good proxy to the resilient affordable housing segment, with a defensive public servant customer profile and a highly business-savvy management team.

       It maintained its “buy” call and forecasts for Lagenda Properties with a higher fair value of RM1.94.

       AmInvestment said the acquisition of new land will increase Lagenda Properties’ gross development value by 13% to RM6.1bil.