Thursday October 25, 2012
UEM Land rises to 5-month high on interest following JV with Ascendas
By LEONG HUNG YEE
PETALING JAYA: UEM Land Holdings Bhd's share price rose to its highest in five months to RM2.18, its intra-day high yesterday, on strong buying interest buoyed by its future earnings prospects following its joint venture (JV) with Singapore-based Ascendas Land International Pte Ltd.
UEM Land closed up 22 sen, or 11.4%, at RM2.15 after trading between the intra-day high and a low of RM1.91. It was also the fourth most actively-traded counter and one of the top ten gainers on Bursa Malaysia with volume of 39 million shares.
On Tuesday, UEM Land Holdings said its wholly owned subsidiary UEM Land Bhd had entered into a JV agreement with Singaporean business space solutions provider Ascendas to develop an integrated eco-friendly tech park in Nusajaya, Johor at a projected investment value of S$1.5bil (RM3.7bil). UEM Land and Ascendas would hold 40% and 60% in the JV respectively. The park will be developed on a 519-acre plot of land and will offer infrastructure to support a range of industries including electronics, pharmaceutical and medical devices, food processing and precision engineering.
Analysts said UEM Land would be able to realised a gain of some RM200mil from the disposal of its land to the JV company. They also point out that the JV would reduce UEM Land's overall development risk in Gerbang Nusajaya.
“Apart from risk sharing, UEM will be able to leverage on Ascendas' brand, market outreach and industrial clienteles both regional and international due to its proximity to Singapore,” an analyst said.
Public Investment Bank said UEM Land might potentially derived RM270mil in land sale gain apart from the JV development profit which spanned about nine years and was maintaining its earnings estimates for UEM Land pending more clarifications.
“We believe UEM Land has brought in a good partner which has proven track record in developing business parks in this region to push the vast project to move faster, riding on Ascendas' expertise, especially to bring in big names into the technology park. Positively, the take-off of the technology park would further boost residential/mixed development sales, which traditionally commanded better margins for the group, it said.
Meanwhile, Hong Leong Investment Bank (IB) Research said the JV would have “minimal financial impact” for UEM Land's financial year ending Dec 31, 2013 (FY13) to FY14 given the long gestation period of industrial properties and uncertainty of launch timing.
The research house added that given the strong ties of the Ascendas group with Jurong Town Corp, it believed that Ascendas could add value not just in terms of providing the masterplan, but also potentially attracting more Singapore small and medium-scale enterprises' to Nusajaya.
According to the Iskandar Regional Development Authority, Singaporean companies dominate the firms setting up factories in Iskandar, accounting for around 15% of the RM32.7bil committed as of June 30.
“We are positive on UEM Land's latest JV with its Singaporean partner, Ascendas. The JV will crystallise its deep-value landbank (via land disposal), lower the overall development risks in GN and allow UEM Land to leverage on Ascendas' brand name and client base,” Maybank Investment Bank Research said.
It noted that the disposal of land could resulted in a total net gain of RM206mil or 4.7sen per UEM Land shares (RM24mil from Phase 1A), based on net book value (NBV) of RM146m as at Dec, 30 2011, land cost of RM416.3mil and infrastructure costs of RM64mil.