KUCHING: UEM Land Holdings Bhd (UEM Land) is expected to see a healthy gain in its earnings from the disposal two parcels of land in Puteri Harbour as the move means more focus on projects of greater scale for the group as well as reduction of competitive high rise developments.
According to the research division of MIDF Amanah Investment Bank Bhd (MIDF Research) in a recent research note, UEM Land announced that it had entered into a sales and purchase agreement to dispose two parcels of land in Puteri Harbour, TM 2 (9.9 acres) and TM 3 (2.6 acres) to Southern Marina Development Sdn Bhd (Southern Marina) for a total cash consideration of RM182 million, which translated into a price of RM334 per square foot (psf).
The research firm believed that the disposal was a significant one-off gain to the group as the land disposal was expected to contribute circa RM182 million to revenue and RM81 million to earnings in the financial year 2013 (FY13).
“Three months ago, UEM Land disposed two other parcels of land in Commercial North Precinct of Puteri Harbour to Liberty Bridge Sdn Bhd for RM400.8 million. In total, both deals will contribute RM583 million to the top line as well as RM261 million to the bottom line in FY13,” it explained.
MIDF Research further outlined that TM 2 and 3 would be disposed to reputable buyer, Southern Marina which is jointly owned by Kuok Brothers Sdn Bhd and PPB group.
Additionally, the research firm opined, “We believe the disposal price of RM334 psf is one the highest transactions recorded in Puteri Habour.
“The transaction price is higher than recent land disposal to Liberty Bridge Sdn Bhd (RM297 psf in January 2013), Encorp (RM180 psf in April 2010) and Tiong Nam Logistic (RM220 psf in June 2011) in Puteri Harbour.”
It further highlighted that the disposal would accelerate the development momentum in Puteri Harbour and subsequent spillover effect would benefit UEM Land.
To note, UEM Land still owns sizable land and immediate pipeline projects within Nusajaya such as D’Estuary, Residential North and Residential.
Apart from that, the research firm said, the disposal wouldstrengthen the balance sheet of UEM Land, following a series of land sales (Liberty Bridge and Southern Marina) as well as disposal of land to joint venture companies (Ascendas and Fast Track) with UEM Land taking minority stake.
“We are revising upwards our FY13 earnings forecast by nine per cent after taking into account the disposal gain,” MIDF Research said. As such, the research firm pegged the target price at a higher RM3.23 per share.