UEM Land to experience an uptick despite weaker sales

14 June 2012 , By Borneo Post

KUCHING: UEM Land Holdings Bhd (UEM Land) is confident of meeting its financial year 2012 estimated (FY12E) key performance indicator (KPI) target, although the first quarter 2012 (1Q12) sales appear weak.

To recap, UEM Land recently announced that it would be adopting its maiden dividend policy, which targeted a 20 per cent to 40 per cent payout of its profit after tax and minority interest (PATAMI), subject to the needs and health of the company.

The group's dividend payout would be in the form of single-tier dividends.

According the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the announcement came as no surprise as UEM Land had previously said it had the intention to do so by early 2012.

"Assuming a 30 per cent payout of PATAMI, we estimate the financial year 2012 and 2013 estimated (FY12-13E) net dividend per share (NDPS) of 2.7 to 3.5 sen (1.4 per cent to 1.8 per cent yield).

"We may raise our FY12-13E NDPS to a 40 per cent payout upon further management guidance; if so, FY12-13E NDPS would be 3.6 to 4.6 sen (1.9 per cent to 2.4 per cent yield)," added the research firm.

Although large developers' yields range between three per cent to four per cent, Kenanga Research was positive on the company's dividend policy as it was a step in the right direction in terms of rewarding long term shareholders.

On the other note, UEM Land completed two major land acquisitions this year which were the Puteri Harbour extension and Desaru land amounting to RM579 million.

"We are not concerned about cash flow given our expected strong sales for the group, which should be driven by an uptick in demand for Johor or Iskandar Malaysia properties.

"We are also looking forward to potential en bloc sales, new launches and Nusajaya land sales by second half of 2012," said the research firm.

The risk of being unable to meet sales target and an up-cycle in Singapore's property sector, as well as sector risk which included negative policies were highlighted by the research firm.

Kenanga Research maintained a fair value of RM2.65 per share based on a 19 per cent discount to fully diluted sum of parts.