KUALA LUMPUR (Aug 23): Shares of UEM Sunrise Bhd (KL:UEMS) fell on Friday and wiped out more than two weeks’ gains after the property developer reported sharply weaker-than-expected second quarter results.
UEM Sunrise declined as much as 5.5 sen or 5.5% to 94 sen, its lowest since Aug 6. At 9.30am, the stock was trading at 95 sen, giving the company a market capitalisation of RM4.8 billion. Trading volume totalled 2.88 million shares so far.
The first-half results only accounted for about 25% of the consensus full-year estimates, and analysts flagged immediate concerns over earnings delivery. At least two research houses downgraded UEM Sunrise.
While the company is on track to meet its own sales target of RM1 billion, the absence of new launches so far this year “raises concerns about the sustainability of its property development segment”, said UOB Kay Hian, which downgraded the stock to ‘sell’ on Friday.
In particular, slower-than-expected launches in Johor suggest that UEM Sunrise may have struggled to capitalise on strong demand in the state with booming residential market and where the company owns a vast swath of land, the research house said.
UEM Sunrise shares are still up about 17% year-to-date amid a broad rally of property developers. Rising demand for industrial assets and a planned special economic zone (SEZ) between Johor and Singapore have also boosted select stocks in the sector.
“While we remain positive on UEM Sunrise's land bank and developments in Iskandar Malaysia due to the Johor-Singapore SEZ, we believe much of the positives are already reflected in its share price,” said Maybank Investment Bank.
The company “will need to prove itself and deliver more than just non-core asset sales”, the research house said and downgraded the stock to ‘hold’ from ‘buy’.
Net profit for the second quarter ended June 30, 2024 (2QFY2024) fell 24% year-on-year to RM18.94 million with first-half earnings totalling RM56.86 million, a 19% decline when compared to the same period in 2023.
The company also booked a net gain of RM31.7 million from the sale of a joint venture, and the company would have recorded a loss without the disposal during 2QFY2024.
“This one-off gain masks underlying operational weakness,” Hong Leong Investment Bank flagged.
Further, “we observed sluggish site progress on the group's high-rise projects, resulting in a build-up of unbilled sales and slower progress billings, which may indicate deeper operational shortcomings”, the research house said and kept the stock on ‘sell’ call.