uem land holdings bhd - credit suisse
TRANSCRIPT
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™
Client-Driven Solutions, Insights, and Access
22 October 2012
Asia Pacific/Malaysia
Equity Research
Real Estate Management & Development
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) ASSUMING COVERAGE
Singapore! Nusajaya beckons
■ Assume coverage with OUTPERFORM. We assume coverage on UEM
Land with an OUTPERFORM rating and a new target price of RM2.85, with
56% potential upside.
■ The Singaporeans are coming! Property demand in Nusajaya has
significantly improved, encouraged by the strengthening bilateral ties
between Singapore and Malaysia, leading to Singapore’s ‘buy-in’ on
Nusajaya. Singapore investments in Iskandar Malaysia (manufacturing
sector) increased three-fold in FY11. Residential property prices have grown
67-90% since 2009. The potential entry of Singapore developers could
further underpin the confidence in the country’s buyers and continue to drive
demand upwards.
■ Demand far exceeds supply. We estimate demand for real estate in
Nusajaya is triple that of supply, suggesting a sizeable market for the region.
This demand is primarily driven by two market segments—home-seekers
from jobs created at Nusajaya and migration of Singapore residents
(including retirees) struggling with high cost of living.
■ Good risk-reward proposition. UEM Land trades at a market-implied land
price of RM11, which is 80% below land value and the market-implied
historical peak, and offers attractive reward versus risk (R-cubed ratio = 1.6-
to-1 of P/BV). Key catalysts are: (1) the potential entry of Singapore
developers, (2) the confirmation of Rapid Transit System (RTS) between
Singapore and Johor, (3) an easier immigration process at the border, and
(4) the success of newly opened catalyst projects and unveiling of new ones.
Share price performance
60
80
100
120
140
0
2
4
6
Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12
Price (LHS) Rebased Rel (RHS)
The price relative chart measures performance against the
FTSE BURSA MALAYSIA KLCI IDX which closed at 1666.35
on 19/10/12
On 19/10/12 the spot exchange rate was RM3.05/US$1
Performance Over 1M 3M 12M Absolute (%) 4.6 -12.4 -5.7 Relative (%) 3.3 -13.9 -21.3
Financial and valuation metrics
Year 12/11A 12/12E 12/13E 12/14E Revenue (RM mn) 1,703.2 2,183.3 2,673.4 3,235.4 EBITDA (RM mn) 377.7 502.7 670.2 795.2 EBIT (RM mn) 364.1 498.2 665.0 789.2 Net attributable profit (RM mn) 301.7 388.2 481.9 568.3 EPS (CS adj.) (RM) 0.07 0.08 0.10 0.12 Change from previous EPS (%) n.a. 0 0 0 Consensus EPS (RM) n.a. 0.08 0.09 0.11 EPS growth (%) 24.7 27.5 23.3 17.5 P/E (x) 27.5 21.6 17.5 14.9 Dividend yield (%) 0 1.5 1.8 2.2 EV/EBITDA (x) 23.4 17.6 14.3 12.4 ROE (%) 8.0 7.8 9.2 10.3 Net debt/equity (%) 17.6 16.5 28.7 31.1 NAV per share (RM) — — — — Disc./(prem.) to NAV (%) — — — —
Source: Company data, Thomson Reuters, Credit Suisse estimates.
Rating OUTPERFORM* Price (19 Oct 12, RM) 1.83 Target price (RM) 2.85¹ Upside/downside (%) 55.7 Mkt cap (RM mn) 7,920 (US$ 2,598) Enterprise value (RM mn) 8,838 Number of shares (mn) 4,327.87 Free float (%) 29.0 52-week price range 2.42 - 1.64 ADTO - 6M (US$ mn) 3.2
*Stock ratings are relative to the relevant country benchmark.
¹Target price is for 12 months.
Research Analysts
Danny Goh
603 2723 2083
Malaysia Research Analyst Team
Tan Ting Min
(Head of Research, Plantations, Property)
Danny Goh
(Banks, Infrastructure)
Loke Foong Wai
(Telekoms, Consumer, Gaming)
Annuar Aziz
(Auto, Transport, Utilities, O&G)
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 2
Focus charts Figure 1: Upward trend from Singapore investments in the
manufacturing sector
Figure 2: Base case—estimated demand could potentially
exceed the supply by three-fold by 2025
0.2
0.80.7
2.0
6%
19%
34%* 34%*
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
0.0
0.5
1.0
1.5
2.0
2.5
2010 2011 YTD Apr-12 YTD Apr-12(annualised)
RM
'bn
Investment from Singapore in manufacturing sector (RM'bn)
% of investment from Singapore to total manufacturing investments
FY2012E
(annualised)
+150%YoY
8%
54%
24%
14%
0%
20%
40%
60%
80%
100%
120%
Demand Supply
Job Creation Singapore foreigners
Malaysians Retirees
33% of Demand
Source: Credit Suisse estimates Source: IRDA
Figure 3: Semi-D prices in Nusajaya outperforms Klang
Valley and Johor
Figure 4: Market-implied land price at a historical low,
close to land prices in 2007
90.0
110.0
130.0
150.0
170.0
190.0
210.0
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
UEMLand: Semi-DSubang Jaya, Selangor: Semi-D (yearly numbers only)Bukit Bandaraya, KL: Semi-D (yearly numbers only)Johor: Semi-D
0
10
20
30
40
50
60
Jul 1
0
Sep
10
Nov
10
Jan
11
Mar
11
May
11
Jul 1
1
Sep
11
Nov
11
Jan
12
Mar
12
May
12
Jul 1
2
Sep
12
RM11
Source: Company Data, Bloomberg Source: Company data, Credit Suisse estimates, Thomson Analytics
Figure 5: P/E at 1 standard deviation below the historical
mean
Figure 6: P/BV below 1 standard deviation below the
historical mean
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Dec
08
Mar
09
Jun
09
Sep
09
Dec
09
Mar
10
Jun
10
Sep
10
Dec
10
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Sep
12
Average = 23.4x 17.2x
+1 Std Dev = 29.5x
- 1 Std Dev = 17.3x
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Dec
08
Mar
09
Jun
09
Sep
09
Dec
09
Mar
10
Jun
10
Sep
10
Dec
10
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Sep
12
Average = 2.4x 1.6x
+1 Std Dev = 3.1x
-1 Std Dev = 1.7x
Source: Company data, Credit Suisse estimates, Thomson Analytics Source: Company data, Credit Suisse estimates, Thomson Analytics
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 3
Singapore! Nusajaya beckons Assume coverage with an OUTPERFORM rating
We assume coverage on UEM Land with an OUTPERFORM rating and a new target price
of RM2.85, with 56% potential upside.
The Singaporeans are coming!
Property demand has significantly improved, encouraged by the strengthening bilateral
ties between Singapore and Malaysia, leading to the Singapore’s ‘buy-in’ on Iskandar.
Foreign investments made up 38% of the RM95.5 bn in total committed investments in
Iskandar Malaysia as at June 2012, with Singapore emerging as the largest investor.
Singapore investments in Iskandar Malaysia (manufacturing sector) increased three-fold in
FY11.
Residential property prices have increased between 67% and 90% since 2009,
outperforming both Klang Valley and Johor, but remained low versus Singapore property
prices (one-sixth to one-third of Singapore property value). Take-up rates of new launches
have accelerated, reaching 60-66% within four to five months of their launch versus an
earlier launch in 2009 which recorded only 23% over the same period.
The long-awaited catalyst projects such as Legoland, and education institutions, including
Marlborough College and Newcastle University of Medicine Malaysia, have finally opened
their doors. We expect more to come soon, thus, invigorating the township.
The potential entry of Singapore developers could further underpin confidence in
Singapore buyers and continue to drive demand upwards.
Demand far exceeds supply
We estimate demand for real estate in Nusajaya is triple that of supply, suggesting a
sizeable market for the region. This demand is primarily driven by two market segments—
home-seekers from jobs created at Nusajaya and migration of Singapore residents
(including retirees) struggling with high cost of living. UEM Land, the largest landowner in
Nusajaya, is likely to be the prime beneficiary of latent demand.
Good risk-reward proposition
UEM Land trades at a market-implied land price of RM11, which is 80% below the market
price and the market-implied historical peak, and offers attractive reward versus risk (R-
cubed ratio = 1.6-to-1 on P/BV). Key price catalysts are:
(1) the potential entry of Singapore developers,
(2) the confirmation of Rapid Transit System (RTS) between Singapore and Johor,
(3) an easier immigration process at the border,
(4) the success of newly opened catalyst projects and unveiling of new ones, and
(5) the expansion of broker coverage.
At such a steep discount to the market price, we believe some of the key concerns have
been fully priced in. Key concerns that have contributed to the stock’s year-to-date
underperformance are:
(1) Datuk Dr Tong Kooi Ong’s imminent departure,
(2) cash flows and gearing concerns following the redemption of RCPS in January 2013,
(3) uncertainty surrounding Malaysia’s general elections, and
(4) a lack of news flow on land transactions.
Target price of RM2.85 with
56% potential upside
Singapore investments
tripled in FY11
Property prices in Nusajaya
have increased 67-90%
Catalyst projects have
commenced operations
Demand is three times of
supply
Market-implied land price is
80% below land value—key
concerns have been fully
priced in
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 4
UEM Land Holdings Bhd ULHB.KL / ULHB MK Price (19 Oct 12): RM1.83, Rating:: OUTPERFORM, Target Price: RM2.85, Analyst: Danny Goh
Target price scenario
Scenario TP %Up/Dwn Assumptions
Upside 3.56 94.54 Price based on RNAV without discount
Central Case 2.85 55.74 RNAV estimate by assigning an average price of RM50psf for the UEM Land's land bank in Nusajaya
Downside 1.23 (32.79) Price based on trough P/B valuation of 1.0x
Key earnings drivers 12/11A 12/12E 12/13E 12/14E
Unbilled sales (RM mn) 1,862 2,691 2,850 3,726 New property sales (RM mn)
2,444 2,346 2,426 3,485 Average selling price for Puteri Harbour (RM psf)
220.0 275.0 302.5 347.9 Average selling price for SiLC (RM psf)
35.0 38.5 42.4 48.7 — — — —
Income statement (RM mn) 12/11A 12/12E 12/13E 12/14E
Sales revenue 1,703 2,183 2,673 3,235 Cost of goods sold — — — — SG&A — — — — Other operating exp./(inc.) 1,325 1,681 2,003 2,440 EBITDA 377.7 502.7 670.2 795.2 Depreciation & amortisation 13.6 4.5 5.2 6.0 EBIT 364.1 498.2 665.0 789.2
Net interest expense/(inc.) 51.4 51.8 108.1 132.4 Non-operating inc./(exp.) — — — — Associates/JV 42.5 40.5 46.9 55.2 Recurring PBT 355.2 486.8 603.9 712.0 Exceptionals/extraordinaries — — — — Taxes 52.3 97.4 120.8 142.4 Profit after tax 302.9 389.5 483.1 569.6 Other after tax income — — — — Revaluations — — — — Minority interests 1.2 1.2 1.2 1.2 Preferred dividends — — — — Reported net profit 301.7 388.2 481.9 568.3 Analyst adjustments — — — — Net profit (Credit Suisse) 301.7 388.2 481.9 568.3
Cash flow (RM mn) 12/11A 12/12E 12/13E 12/14E
EBIT 364.1 498.2 665.0 789.2 Net interest (51.4) (74.0) (135.1) (165.6) Tax paid (43.9) (97.4) (120.8) (142.4) Working capital — — — — Other cash & non-cash items (87.2) (188.1) (248.9) (264.3) Operating cash flow 181.6 138.7 160.3 216.9 Capex (38.0) (20.7) (23.1) (25.6) Free cash flow to the firm 143.6 117.9 137.2 191.3 Acquisitions — — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) — — — — Investing cash flow (424.2) (9.1) (638.9) (311.1) Equity raised 545.0 — — — Dividends paid — — — — Net borrowings 33 15 1,075 510 Other financing cash flow (146.6) (116.5) (653.5) (170.5) Financing cash flow 431.3 (101.5) 421.6 339.5 Total cash flow 188.6 28.1 (57.0) 245.3 Adjustments — — — — Net change in cash 188.6 28.1 (57.0) 245.3
Balance sheet (RM mn) 12/11A 12/12E 12/13E 12/14E
Cash & cash equivalents 632.1 660.3 603.3 848.6 Current receivables 1,020 1,217 1,489 1,802 Inventories 124.5 200.1 245.1 296.6 Properties under development 1,066 1,054 1,400 1,423 Other current assets 272.2 272.2 272.2 272.2 Current assets 3,115 3,403 4,010 4,642 Property, plant & equip. 162.3 178.6 196.4 216.1 Properties under development 2,752 2,719 2,959 3,151 Investment properties 511.1 511.1 511.1 511.1 Investment in Associates/JV 399.7 496.2 599.2 758.9 Intangibles 621.4 621.4 621.4 621.4 Other non-current assets 3,495 3,462 3,702 3,894 Total assets 7,794 8,162 9,130 10,132 Accounts payable 515.8 596.0 659.0 752.5 Short-term debt 51.7 66.7 76.7 86.7 Current provisions 157.3 157.3 157.3 157.3 Other current liabilities — — — — Current liabilities 724.8 820.0 893.0 996.5 Long-term debt 1,512 1,512 2,188 2,688 Non-current provisions — — — — Other non-current liab. 260.7 260.7 260.7 260.7 Total liabilities 2,497 2,592 3,342 3,946 Shareholders' equity 4,836 5,108 5,325 5,723 Minority interests 460.2 461.4 462.6 463.9 Total liabilities & equity 7,794 8,162 9,130 10,132
Per share data 12/11A 12/12E 12/13E 12/14E
Shares (wtd avg.) (mn) 4,724 4,724 4,724 4,724 EPS (Credit Suisse) (RM)
0.07 0.08 0.10 0.12 DPS (RM) — 0.03 0.03 0.04 BVPS (RM) 1.12 1.18 1.23 1.32 NAV per share (RM) — — — —
Key ratios and valuation 12/11A 12/12E 12/13E 12/14E
Growth(%) Sales revenue 263 28 22 21 EBIT 103 37 33 19 Net profit 55.1 28.7 24.1 17.9 EPS 24.7 27.5 23.3 17.5 Margins (%) EBITDA 22.2 23.0 25.1 24.6 EBIT 21.4 22.8 24.9 24.4 Pre-tax profit 20.9 22.3 22.6 22.0 Net profit 17.7 17.8 18.0 17.6 Valuation metrics (x) P/E 27.5 21.6 17.5 14.9 P/B 1.64 1.55 1.49 1.38 Dividend yield (%) — 1.47 1.83 2.15 EV/sales 5.20 4.05 3.58 3.04 EV/EBITDA 23.4 17.6 14.3 12.4 EV/EBIT 24.3 17.7 14.4 12.5 ROE analysis (%) ROE 8.0 7.8 9.2 10.3 ROIC 6.94 6.27 7.63 8.11 Asset turnover (x) 0.22 0.27 0.29 0.32 Interest burden (x) 0.98 0.98 0.91 0.90 Tax burden (x) 0.85 0.80 0.80 0.80 Financial leverage (x) 1.47 1.47 1.58 1.64 Credit ratios Net debt/equity (%) 17.6 16.5 28.7 31.1 Net debt/EBITDA (x) 2.47 1.83 2.48 2.42 Interest cover (x) 7.1 9.6 6.2 6.0
Source: Company data, Thomson Reuters, Credit Suisse estimates.
0
10
20
30
40
50
60
70
80
90
100
Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12
12MF P/E multiple
0
1
2
3
4
5
6
Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12
12MF P/B multiple
Source: IBES
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 5
The Singaporeans are coming! The Iskandar region has made good progress since its inception in 2006 and we finally
see Nusajaya taking shape as the main real estate developer in Iskandar. Investor
sentiment has significantly improved, encouraged by the strengthening bilateral ties
between Singapore and Malaysia, leading to the Singapore’s ‘buy-in’ on Iskandar.
Singapore buying into the Iskandar story
Total committed investments into the Iskandar region reached RM95.5 bn as at June
2012. The two largest segments of investments are manufacturing (34%) and property
(31%). The Iskandar Regional Development Authority (IRDA) expects investments to hit
the RM100 bn mark by year-end. Investment from 2006 to 2010 of RM70 bn was 49%
higher than its targeted RM47 bn. We estimate that by 2025, inbound investments could
be 21% higher than IRDA’s target if investor interest momentum is maintained.
Figure 7: Cumulative investments in Iskandar Malaysia
almost reaching RM100 bn
Figure 8: Cumulative investments in Iskandar Malaysia
almost reaching RM100 bn
0
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011 1H2012
RM
'bn
Government Properties Utilities, tourism and others Manufacturing
11.3
25.8
55.6
41.7
69.5
84.8
95.5
70
26 *47
73
107
155
382
94
127
173
464
0
50
100
150
200
250
300
350
400
450
500
2006-2010 2011-2015 2016-2020 2021-2025 Total (by 2025)
Actual Target Estimates
First 5 years:
Achieved 49%
higher than
target
Total investments by
2025 could be 21%
higher than target
Source: IRDA Source: IRDA, Credit Suisse estimates, * up to June 2012
Foreign investments make up 38% of total investments with Singapore emerging as the
largest investor. Investments from Singapore in the manufacturing sector have increased
since both the prime ministers from Malaysia and Singapore agreed on the Points of
Agreement (POA) settlement in May 2010, growing three-fold in 2011 versus 2010. We
expect investments from Singapore to pick up with the potential entry of Singapore
developers investing in Nusajaya.
Total committed
investments have reached
RM95.5 bn
Foreign investments make
up 38% of total investments
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 6
Figure 9: 38% are foreign investments in Iskandar
Malaysia
Figure 10: Upward trend from Singapore investments in
the manufacturing sector
22.8 25.5 28.8 34.1 36.5
18.9
30.1
40.7
50.659.0
0
20
40
60
80
100
120
2008 2009 2010 2011 1H2012
RM
'bn
Foreign Local
0.2
0.80.7
2.0
6%
19%
34%* 34%*
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
0.0
0.5
1.0
1.5
2.0
2.5
2010 2011 YTD Apr-12 YTD Apr-12(annualised)
RM
'bn
Investment from Singapore in manufacturing sector (RM'bn)
% of investment from Singapore to total manufacturing investments
FY2012E
(annualised)
+150%YoY
Source: IRDA Source: Company data, Credit Suisse estimates,* % calculated from
annualised investments
Nusajaya outperforms Klang Valley and Johor
We see evidence of robust demand in Nusajaya, given the high growth in residential
property prices (increased 67-90% since 2009), outperforming Klang Valley and Johor
(70% and 43%, respectively). Take-up rates for Imperia, Puteri Harbour and Impiana, East
Ledang have accelerated to 60-66% within four to five months of their launch compared to
one of UEM Land’s initial condominium launches in 2009—Ujana at East Ledang—which
achieved only a 23% take-up rate over a similar period. Today, average sales to foreigners
make up 50-60% of total sales, with the majority of buyers coming from Singapore and
Malaysians working in Singapore.
Figure 11: Semi-D prices in Nusajaya outperform those of
Klang Valley and Johor
Figure 12: Growth in terrace prices catches up with Klang
Valley’s
90.0
110.0
130.0
150.0
170.0
190.0
210.0
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
UEMLand: Semi-DSubang Jaya, Selangor: Semi-D (yearly numbers only)Bukit Bandaraya, KL: Semi-D (yearly numbers only)Johor: Semi-D
90.0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
170.0
180.0
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
UEMLand: Terrace KL: Terrace
Johor: Terrace Selangor: Terrace
Source: The Edge, JLW Source: The Edge
Despite the high growth in property prices, the market value of properties in Singapore remains at three to six times higher than that of properties in Nusajaya. We believe there is further upside to property prices in Nusajaya should price trends converge towards Singapore housing price levels. We estimate that a 5% reduction in the pricing gap, while
Take-up rates accelerated
to 60-66% within 4-5 months
Singapore property prices
are 3-6x higher than
properties in Nusajaya
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 7
keeping sales status quo, could potentially increase UEM Land’s three-year earnings CAGR by 10 p.p. to 15 p.p.
Figure 13: Property prices in Singapore are 3-6x higher than in Nusajaya (residential condominiums only)
Pricing gap
Singapore (Outer Central Region)
S$923/sq ft / RM2,304/sq ft 3.1x
Nusajaya (Puteri Harbour - harbourfront)
Singapore (Core Central Region) RM750/sq ft
S$1,685/sq ft / RM4,207/sq ft 5.6x
Source: URA, Company data, Credit Suisse estimates
Figure 14: Earnings growth potential from narrowing pricing gap
Narrowing of Pricing gap UEM Land SP Setia (Large cap) IJM Land (mid cap)
Compared to price gap by 3-yr earnings CAGR (%)
Singapore (OCR) Current 3.1x 21.3 15.1 20.3
Singapore (CCR) 5.6x 21.3
Singapore (OCR) 5% 2.7x 31.2
Singapore (CCR) 4.4x 36.0
Singapore (OCR) 10% 2.4x 37.1
Singapore (CCR) 3.6x 48.6
Singapore (OCR) 20% 1.9x 51.3
Singapore (CCR) 2.6x 80.1
Source: Credit Suisse estimates
Launch of catalyst projects to draw more interest
The long-awaited catalyst projects such as Legoland, and education institutions, including
Marlborough College and Newcastle University of Medicine Malaysia, have finally opened
their doors. We expect more to come soon, thus, invigorating the township. These planned
catalyst projects strategically position Nusajaya as an inexpensive alternative to Singapore
and provide land to house core services such as education and healthcare, which
Singapore lacks. We expect the realisation of upcoming (already planned) projects and
new catalyst projects to draw greater interest and confidence in the development of
Nusajaya.
■ Affordable education
We believe there is a growing market for quality, reputable education, led by rising income
levels in the South East Asia region and growing expatriate families living in Singapore.
Educity, being the first of its kind in South East Asia, aims at tapping this underserved
market segment with affordable rates.
Marlborough College and Raffles American School offer British and American curriculum,
respectively, from pre-school to pre-university levels. Marlborough College began its first
term in August 2012, accepted 350 students, beyond its initial 250 target. The students
mostly hail from expatriate families from the US, Australia, Britain, Canada, Japan,
Thailand and Singapore. It aims to receive 13,050 students in the next five years. At the
moment, we understand that there is a long-waiting list to enroll in Marlborough College.
On the other hand, Raffles American School now operates on a temporary premises out of
five shops, waiting for the completion of its 46-acre permanent site in Nusajaya.
Educity also accommodates reputable universities, each offering their best faculty in
Iskandar Malaysia. Figure 15 shows the list of universities and the courses that it offers.
Educity is expected to house 12,000 to 16,000 students by 2018.
Catalyst projects have
opened and we expect more
to come
Overwhelming response
received by Marlborough
College
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 8
Figure 15: Universities in Educity
Universities Faculty Opened/expected to be opened by
Newcastle University Medicine Malaysia Medicine 2011
University of Southampton Engineering Sep/Oct 2012
Netherlands Maritime Institute of Technology Maritime Transportation, Port & Shipping Courses December 2012
Raffles University Iskandar Design & Business 2013
University of Reading Malaysia Law & Business 2015
Source: Company data, Credit Suisse estimates
Figure 16: Marlborough College Figure 17: Newcastle University Medicine Malaysia
Source: Marlborough College Source: Newcastle University Medicine Malaysia
Figure 18: Students accommodation Figure 19: Sports complex
Source: Credit Suisse Source: Credit Suisse
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 9
■ Cheaper healthcare
Recently-listed Integrated Healthcare Holdings (IHH) is building Gleneagles Medini
Hospital in Medini, Nusajaya, slated to be opened in 2015. The hospital will have a fully
integrated healthcare service platform with a 300-bed hospital, nursing home and a
rehabilitation centre. The establishment of these healthcare infrastructure facilities
presents itself as a compelling alternative to relatively high healthcare costs in Singapore.
Further, in 2010 the Singapore government allowed the use of MediSave from CPF for
Singapore residents to fund bills in ten hospitals owned by IHH, one of which is
Gleneagles Medini Hospital (when it opens) to encourage Singaporeans to seek cheaper
medical services outside the country and to reduce the burden on overcrowded public
hospitals in the country. Columbia Asia Hospital is the other hospital in Nusajaya,
operating in Afiat Healthpark with a capacity of 80 beds.
■ Inexpensive shopping
Singaporeans frequently cross the border to Johor for cheaper shopping, food and
entertainment, especially during weekends and public holidays. As such, shopping malls in
Nusajaya could position themselves as major complements to tourist attractions in
Iskandar. The Lifestyle Retail Mall in Medini, Nusajaya, is located at the entrance of the
Legoland Malaysia theme park. Phase 1 of the mall was opened on 22 September 2012,
in conjunction with the opening of Legoland. In the pipeline, UEM Land plans to build an
Asian Trade Centre or ‘China Mall,’ a wholesale market similar to the one in Guangzhou,
China.
Figure 20: Lifestyle Retail Mall of Medini Figure 21: Lifestyle Retail Mall of Medini
Source: Credit Suisse Source: Credit Suisse
■ Theme parks
Theme parks represent an excellent crowd-puller to Nusajaya and they have the multiplier
impact on the supporting businesses. Currently, there are two theme parks in Nusajaya—
Legoland and Puteri Harbour Family Theme Park.
Legoland Malaysia, the sixth Legoland in the world, which opened on 22 September 2012,
has sold 65,000 annual passes to-date. Since its opening, the number of visitors to Legoland
has been on average 3,000-4,000 on a weekday and 10,000-15,000 on weekends. It
expects to receive 1.2 mn visitors in the first year of operation. Legoland is constructing its
water park, expected to be opened in 2013, followed by Legoland Hotel in 2014.
Singaporeans can use
MediSave at Gleneagles
Medini Hospital
Legoland received 10,000-
15,000 visitors on weekends
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 10
Figure 22: Legoland Malaysia at business close on a
weekday
Figure 23: Queue in one of the rides in Legoland on a
weekday
Source: Credit Suisse Source: Legoland Malaysia
Puteri Harbour Family Theme Park is an indoor hi-tech interactive theme park that
features famous characters such as Hello Kitty in Sanrio Hello Kitty Little Town, HIT
Entertainment characters like Bob the Builder, Barney, Angelina Ballerina, Pingu and
Thomas & Friends in The Little Big Club and The Kampung Boy Lat from a local comic.
The theme park is set to be opened in November 2012.
■ AutoCity
UEM Land plans to build an AutoCity in ‘Gerbang Nusajaya,’ a new phase of development,
to house various car showrooms. AutoCity will differentiate itself from other car
showrooms by having a test track. We understand that AutoCity is built to explicitly attract
Singaporeans who wish to own and drive luxury cars but do not have space to do so in
Singapore.
Figure 24: Summary of catalyst projects expected to commence operations soon
Catalyst developments Launch/opening
Puteri Harbour Family Theme Park Nov 2012
Legoland Water Park 2013
Pinewood Studios 2013
Legoland Hotel 2014
Gleneagles Medini Hospital 2015
China Mall 2014/2015
AutoCity 2014/2015
Source: Company data, Credit Suisse estimates
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 11
Demand far exceeds supply We believe demand will be largely driven by two market segments—home seekers from
new jobs created in Nusajaya and migration of Singapore residents (including retirees)
who struggle with high cost of living. We estimate that the size of demand is 3x that of
supply, suggesting a sizeable market for Nusajaya.
Why these two market segments?
The Iskandar Regional Development Authority (IRDA) aims to attract RM382 bn worth of
investments into the region and forecasts new investments will create an additional
346,000 job vacancies by 2025. Is this achievable? IRDA had achieved committed
investments of RM95.5 bn as at June 2012, 39% above its target. The opening of
Legoland and Pinewood Studios is expected to generate 3,095 new jobs from 2012 to
2014. We believe corporations and manufacturers from Singapore will eventually take the
plunge primarily due to two reasons: (1) a lack of land in Singapore and (2) the
government is restricting the inflow of foreign workers into the country. We believe the
‘buy-in’ from Singapore corporations and manufacturers will pave way for more
investments in Nusajaya as an alternative to the former, including foreign investors looking
to establish a presence in the ASEAN region.
We view Nusajaya as an attractive alternative to the middle-income Singaporeans who
find it increasingly difficult to cope with the cost of living due to (1) high cost of amenities
and transportation, (2) high property prices and (3) recent tightening of immigration
policies and property cooling measures by the government. Consequently, Nusajaya’s
cheaper (by Singapore standards) premium living should appeal to this segment. We
believe that three segments of residents are most affected by rising costs and tightening of
government’s policies: (1) mid-income foreigners, (2) Malaysians living in Singapore and
(3) Singapore retirees.
Factors underpinning demand from Singapore
Scarcity of land in Singapore
Despite increased supply of the industrial space in Singapore, vacancy rates for the
industrial space are near all-time lows since 2004, suggesting robust demand for industrial
land. Prices have increased 27-28% on a three-year CAGR (2009-12) versus the 7-8%
(2002-12) on a ten-year CAGR. Land is scarce in the island state, and expansion of
factory and warehouse space is limited and costly.
Figure 25: Factory space supply vs. vacancy rate in
Singapore
Figure 26: Warehouse space is scarce to meet demand
0
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2012
Supply ('000 sqm) - LHS Vacancy Rate (%) - RHS
Source: URA Source: URA
Demand driven by new job
creation in Nusajaya and
migration of Singapore
residents struggling with
high cost of living
Land is limited and costly in
Singapore
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 12
Figure 27: Upward trend in factory and warehouse prices (S$/sq ft) especially in the past
three years
50
100
150
200
250
300
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
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2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
Factory (All Types) Warehouse
Source: URA
Across the straits, Nusajaya could provide larger pieces of industrial land at a price which
is only one-sixteenth of the value in Singapore. Nusajaya has 191 acres of industrial land
remaining in Phase 3 of SilC and has assigned another 500 acres as industrial land in its
new development, Gerbang Nusajaya. We estimate that the new industrial area could be
divided into 354 plots, with 4,000 sq mt each (the size is 1.4-2.9x larger than industrial
plots in Tuas Techpark, Singapore).
Figure 28: Industrial land in Singapore is worth 16x more expensive than in Nusajaya
RM/sq ft Singapore Nusajaya Ratio
Industrial land 554 35 16x
Source: Company data, URA, The Edge, Credit Suisse estimates
Singapore ranks sixth most expensive city to live in the world vs. Malaysia at 102
Singapore is increasingly more expensive to live in. According to Mercer’s latest Cost of
Living Survey 2012, Singapore ranks as the sixth most expensive city to live in globally,
moving up two spots from 2011 (2010: 11th rank). It ranks third in Asia after Tokyo and
Osaka but ahead of Hong Kong (fourth). Kuala Lumpur (acting as a proxy to Johor) ranks
102nd
behind Jakarta (61st) and Bangkok (81
th).
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 13
Figure 29: Singapore ranks the sixth-most expensive city to live in,
according to the Cost of Living Survey 2012 by Mercer
2012 2011 City Country
1 2 Tokyo Japan
2 1 Luanda Angola
3 6 Osaka Japan
4 4 Moscow Russia
5 5 Geneva Switzerland
6 7 Zurich Switzerland
6 8 Singapore Singapore
8 3 N’Djamena Chad
9 9 Hong Kong Hong Kong
10 11 Nagoya Japan
11 14 Sydney Australia
12 10 São Paulo Brazil
13 12 Rio de Janeiro Brazil
14 16 Bern Switzerland
15 21 Melbourne Australia
16 21 Shanghai China
17 20 Beijing China
18 15 Oslo Norway
19 30 Perth Australia
20 12 Libreville Gabon
102 104 Kuala Lumpur Malaysia
Source: Company data, Credit Suisse estimates
High housing prices in Singapore
Singapore property prices have risen 55% from the global financial crisis low. Despite
Singapore government’s five attempts to moderate rising property prices, they have
continued to rise. Our Singapore property analyst, Yvonne Voon, believes that prices will
continue to be on an upward trend due to building cost inflation and increased competition
for land bank. However, the government will impose more cooling measures to keep
prices relatively flat. Consequently, Singapore property buyers are looking at choices
outside Singapore, and Nusajaya represents a very good alternative given its geographical
proximity.
Figure 30: Singapore property prices continue to be on an upward trend despite five
rounds of cooling measures since September 2009
Source: URA, HDB, Credit Suisse
Upward trend in Singapore
housing prices
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 14
We have simulated the affordability of housing for a household in Singapore versus in
Nusajaya and found that a typical household with a median monthly household income of
S$5,624 can only afford a 700 sq ft three-bedroom HDB flat in Singapore versus a 3,699
sq ft two-storey semi-detached landed property in Nusajaya. We believe the vast
difference in affordability is sufficient to offset an additional 20-30 minutes of extra travel
time for some residents.
Figure 31: Singapore median household income can afford to buy...
Median monthly household income S$5,624
Housing expenses 30% of monthly household income
Monthly installment S$1,687
Can afford to buy:
HDB flat in Singapore 1 unit of 700 sq ft 3-bedroom
1 unit of 970 sq ft 4-bedroom in OCR
Private condominium in Singapore 1 unit of 420 sq ft condominium in OCR (at the edge of Singapore)
Accomodation in Nusajaya 1 unit of 3,699 sq ft (built-up) 2-storey semi-D
2.2 units of 3000 sq ft (built up) 2-storey link house
1 unit of 1673 sq ft condominium in Puter Harbour
Source: Singstat, HDB, URA, Credit Suisse estimates
Singapore government tightening immigration laws
Singapore’s latest general election in May 2011, often described as a ‘watershed’ election,
saw the ruling party winning with the lowest share of votes since independence in 1965.
The relatively poor election result has put more pressure on the Singapore government to
address voters’ concerns such as high residential property prices and the influx of foreign
workers.
Since end-2011, the Singapore government has imposed various restrictive measures that
made living in Singapore harder for foreigners and permanent residents.
■ In the last round of cooling measures on properties in 7 December 2011, the
government imposed an additional 10% of buyer’s stamp duty for foreigners and 3%
for PRs buying a second and subsequent property.
■ In April 2012 the Singapore government abolished foreigners’ application for
permanent residence status via a minimum of S$10 mn deposit in Singapore.
■ Effective 1 September 2012, foreigners must earn at least S$4,000 (currently
S$2,800) a month to sponsor their spouses and children to live in Singapore, while
certain categories of foreign workers will no longer be permitted to bring parents and
in-laws into Singapore on long-term visit passes. New rules will apply to foreign
workers who switch jobs after 1 September 2012.
■ From 2012 onwards, Singapore citizens will be given absolute priority over PRs when
balloting for specific schools when applications exceed vacancies.
Further, Singapore newspapers reported that the government is contemplating an
increase of school fees for permanent residents’ children.
Singapore government restricting inflow of foreign workers
The government, in its attempt to manage immigration, has announced a 5% reduction in
Dependency Ratio Ceilings (DRCs) (maximum proportion of foreign workers allowed) for both
the manufacturing and services sectors (new DRC of 60% and 45%, respectively), effective 1
July 2012 during the announcement of Singapore’s Budget 2012 in February 2012.
Companies that exceed the new DRCs with their existing foreign workforce will be given a
grace period of two years (until June 2014) to comply with the new DRCs. It was reported that
some 500 manufacturing companies and 8,500 service companies would be affected.
Median monthly household
income in Singapore can
afford a 700 sq ft HDB flat
vs a semi-detached land
property in Nusajaya
Singapore government
under pressure to tighten
immigration laws
Singapore government
restricting foreign workers
versus incentives in
Nusajaya
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 15
With the tightened inflow of foreign workers into Singapore, companies with high
dependency on foreign workers could potentially look to Nusajaya for a solution.
We list below some of the perks that Iskandar Regional Development Authority (IRDA) is
offering to companies operating in approved areas of the region:
■ Exemption from the Foreign Investment Committee (FIC) rules (in relation to purchase
of properties)
■ Unrestricted employment of foreign knowledge workers
■ Tax incentives:
o Exemption from corporate income tax for ten years
o Exemption from withholding tax on payment of royalty and services fee to non-
residents for ten years
■ 30% bumiputera equity not required
Additionally, knowledge workers in Iskandar enjoy a flat tax rate of 15%, lower than top
marginal personal tax rate of 25% in Malaysia and 20% in Singapore. The lower tax rate
bodes well to encourage employees to relocate.
Upward trend of MYRSGD exchange rates and a low interest rate environment
Although the Malaysian government imposed some tightening measures on speculative
buying, the environment remained conducive for the property market given low lending
rates and favourable exchange rates for Singaporeans. Average lending rates are at their
lowest since the Asian financial crisis. The long-term upward trend in MYRSGD exchange
rates bodes well for Singaporeans as they stand to have a two-pronged gain on property
investment—capital and exchange rates gains.
Figure 32: Long-term upward trend in MYRSGD exchange
rate
Figure 33: Malaysian banks’ average lending rates at their
lowest
2.00
2.10
2.20
2.30
2.40
2.50
2.60
Jan-
01
Jun-
01
Nov
-01
Apr
-02
Sep
-02
Feb
-03
Jul-0
3
Dec
-03
May
-04
Oct
-04
Mar
-05
Aug
-05
Jan-
06
Jun-
06
Nov
-06
Apr
-07
Sep
-07
Feb
-08
Jul-0
8
Dec
-08
May
-09
Oct
-09
Mar
-10
Aug
-10
Jan-
11
Jun-
11
Nov
-11
Apr
-12
Sep
-12
RM
/ S
GD
1
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
31/0
1/19
97
31/0
1/19
98
31/0
1/19
99
31/0
1/20
00
31/0
1/20
01
31/0
1/20
02
31/0
1/20
03
31/0
1/20
04
31/0
1/20
05
31/0
1/20
06
31/0
1/20
07
31/0
1/20
08
31/0
1/20
09
31/0
1/20
10
31/0
1/20
11
31/0
1/20
12
Source: Bloomberg Source: BNM
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 16
Size of estimated demand versus supply
Size of the different market segments
■ Job creation from new investments in Nusajaya
The Iskandar Regional Development Authority (IRDA) forecasts new investments will
create an additional 346,000 job vacancies by 2025 of which 69% or 240,000 job
vacancies are from key economic activities earmarked for Nusajaya.
Figure 34: IRDA's forecast of job vacancies by 2025
89,363
61,168
46,655
38,715
30,450 28,771
19,786 15,876 15,237
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Ele
ctric
al &
ele
ctro
nics
Fin
anci
al c
onsu
lting
Logi
stic
s
Edu
catio
n
Hea
lthca
re
Foo
d &
agr
o pr
oces
sing
Tou
rism
Pet
roch
em &
Ole
oche
m
Cre
ativ
e in
dust
ries
Source: IRDA
■ Foreign labour force
36% of Singapore’s labour force are non-residents and this figure is growing at a 5.4%
ten-year CAGR (vs. 2.4% for residents). Non-residents grew by 6.3%YoY in 2011. As at
2011, there were approximately 1 mn foreign workers (excluding foreign domestic helpers)
in Singapore.
Figure 35: 36% of Singapore’s labour force are non-residents (2011)
Residents64%
Non-residents36%
Source: Ministry of Manpower, Singstat
IRDA targets to create
346,000 new jobs by 2025
36% of Singapore’s labour
force are non-residents
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 17
■ Malaysian citizens working and residing in Singapore
World Bank published a report in 2011 on Malaysia’s brain drain issue and estimates that
the Malaysian diaspora were 1 mn in 2010, of which 33% are from brain drain. Singapore
alone absorbs 57% of the Malaysian diaspora and 54% of the brain drain. Skilled diaspora
is growing at an average of 6% p.a.
Figure 36: Singapore gets the bulk of Malaysian diaspora Figure 37: Growth in brain drain, annual 2000-10
4
2
5
10
3
15
54
2
2
6
6
7
10
57
0 10 20 30 40 50 60
Canada
New Zealand
United Kingdom
United States
Brunei
Australia
Singapore
%
Diaspora in 2010 Brain drain in 2010
0.5
2.6
2.9
3.5
4.7
4.7
6.2
0 1 2 3 4 5 6 7
Canada
United Kingdom
Australia
United States
New Zealand
Brunei
Singapore
Average: 4.2%
Source: World Bank Source: World Bank
■ Retirees in Singapore
The Singapore’s population is ageing. The >60 age group recorded the highest growth at
5.8% in 2011 while the 0-24 age group shrunk -1.1% in 2011. The ratio of working
population (aged 25-59) to old age population (age >60) dropped from 5 in 2001 to 3.7 in
2011.
Figure 38: Singapore residents aged >60 growing at 4.5%
ten-year CAGR
Figure 39: Highest growth rates for age group >60
362 413
441 469
500 530
561
-
100
200
300
400
500
600
2001 2006 2007 2008 2009 2010 2011
'000
10-yr CAGR = 4.5%
0.0 0.2 0.5
1.1
-0.6-1.1
1.6
1.4 1.3
2.4
0.7 0.0
2.7
6.9 6.3 6.66.1
5.8
1.2
1.6 1.7
2.5
1.0
0.5
-2.0
0.0
2.0
4.0
6.0
8.0
2006 2007 2008 2009 2010 2011
0-24 25-59 >60 Total
Source: Singstats Source: Singstats
Scenario analysis on estimated demand and supply by 2025
We estimate that total demand is three times total supply by 2025 suggesting potential
upside to property prices if supply is released gradually will match the growth in demand.
Our base case is based on the following assumptions:
~400,000 Malaysians in
Singapore
Singapore is an ageing
population
Demand is three times of
supply by 2025
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 18
Assumptions for demand:
54% of the new job creation will be in Nusajaya, from which we took half the number
of skilled workers estimated at 48%.
10% of foreign workers in Singapore will migrate to Nusajaya
20% of Malaysians living in Singapore will migrate to Nusajaya, from which we have
halved the amount assuming an average household size of two adults
5% of Singapore retirees will migrate to Nusajaya
Assumptions for supply:
Land efficiency of 70%
60% of land earmarked for residential properties
Density of 15 housing units per acre over remaining land for development
Figure 41 displays the different sizes of what demand could be versus supply if the base
case assumptions for demand were adjusted by -5 p.p to +15 p.p while keeping our
assumptions for supply unchanged. For example, a -5 p.p. adjustment reduces the
assumption of foreign workers in Singapore migrating to Nusajaya from 10% to 5%. The
reduction will be applied across the board. We found that demand is still greater than
supply at one notch below our base case (a 5 p.p reduction in our base case) but the
potential upside far exceeds supply.
Figure 40: Base case: Estimated demand could potentially
exceed supply by three-fold by 2025
Figure 41: Scenario analysis on estimated demand vs.
base case supply by 2025
8%
54%
24%
14%
0%
20%
40%
60%
80%
100%
120%
Demand Supply
Job Creation Singapore foreigners
Malaysians Retirees
33% of Demand
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
-5% Base case +5% +10% +15% Supply
Job creation Singapore foreigners Malaysians Retirees
1.4x of supply
3.1x
4.7x
6.4x
8.0x
Source: Credit Suisse estimates Source: Credit Suisse estimates
Figure 42 shows a matrix of estimated demand versus supply in Nusajaya with different
assumptions of demand and supply, i.e. changing base case demand assumptions by -5
p.p to 15 p.p while imposing different levels of density assumptions to estimate supply.
Demand falls below supply only in two instances out of 25 possibilities.
Figure 42: Matrix of estimated demand and supply by 2025
Demand = x times of supply
Demand (% change to base case assumptions) -5% Base case +5% +10% +15%
Supply (density of units per acre)
10 2.1x 4.6x 7.1x 9.5x 12.0x
Base case = 15 1.4x 3.1x 4.7x 6.4x 8.0x
20 1.1x 2.3x 3.5x 4.8x 6.0x
25 0.9x 1.8x 2.8x 3.8x 4.8x
30 0.7x 1.5x 2.4x 3.2x 4.0x
Source: Credit Suisse estimates
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 19
Good risk-reward proposition UEM Land offers attractive reward versus risk when we measure with the R-cubed ratio
based on P/BV (R-cubed ratio = 1.6-to-1 on P/BV). We have used the following to
calculate the R-cubed ratio.
■ Downside risk: This is measured based on the percentage decline in price to ‘trough’
P/BV (global financial crisis (GFC) low).
■ Upside risk: Potential upside to our target price.
■ Reward versus risk: This is measured by the ratio of potential upside to potential
downside.
Figure 43: R-cubed ratio breakdown
P/BV RM / share
Current 1.59 1.85
Trough (GFC low) 1.04 1.23
Target Price 2.40 2.85
Upside 54%
Downside -34%
R3 1.60
Source: Thomson Analytics, Credit Suisse estimates
Potential catalyst
The key catalysts for UEM Land that could potentially cause a re-rating of the stock:
Potential entry of Singapore developers
Management is in talks with Singapore developers to undertake some developments in
Nusajaya jointly and expects to announce a partnership by year-end. We understand the
reputable Singaporean industrial developer is likely to be Ascendas to develop a 500-acre
industrial land in ‘Gerbang Nusajaya’ – Nusajaya Phase 2.
In 2Q12, UEM Land booked a conditional sale of eight acres in Puteri Harbour for RM93
mn to a foreign developer. The identity of the foreign developer has not been announced
but we expect response from Singapore would be good if the foreign party is a reputable
Singapore developer as we have seen from the launch of Sommerset Service Apartments
in Puteri Harbour, managed by Ascott (a Singapore developer), which was snapped up
(mostly by Singaporeans) at record time.
We expect the potential entry of Singapore developers, the likes of Capitaland, CDL Land,
Mapletree, Keppel Land, could further underpin confidence of Singapore buyers and
continue to drive demand northwards.
Confirmation of Rapid Transit System between Singapore and Johor
Phase 1 of the feasibility study is expected to be completed by year-end. We expect the
execution plan of the Rapid Transit System (RTS) to be announced by 2013. Nusajaya
and Singapore would be truly borderless with the completion of RTS in 2018 coupled with
the implementation of a single co-located CIQ facility.
Easier immigration process at the border
The full implementation of Malaysian Automated Clearance System (MACS) to Singapore
citizens and residents will ease human traffic at the immigration, thus reducing travel time
between Malaysia and Singapore. The Joint Meeting Committee (JMC) is undertaking a
feasibility study to have a single co-located CIQ facility. These positive efforts could
eventually lead to Malaysia and Singapore being ‘borderless’ like in Europe.
Big potential upside, limited
downside
Singapore property
developers investing in
Nusajaya
RTS to link Singapore and
Johor
Easier immigration process
reduces hassle and
shortens travel time
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 20
Success of newly opened catalyst projects and unveiling of new ones
The opening of catalyst projects in Nusajaya has been well received with the excitement
by general public in Malaysia and Singapore. More will be convinced when these projects
prove to remain successful even after a period of novelty.
Management expects to unveil more of its plans for ‘Gerbang Nusajaya’ and upcoming
catalyst projects in 2013. We expect the roll-out of Phase 2 catalyst projects and
announcement of potential partnerships with foreign investors on Autocity and China Mall
to be positive for UEM Land.
Limited downside risks
Street earnings expectations are already low and not difficult to beat
Street consensus for FY12 net profit of RM356 mn is 16% below UEM Land’s FY12 KPI
target of RM422 mn. 1H12 net profit of RM162 mn was 46% of street’s full-year estimates.
We believe the market has priced in the possibility of underperformance in FY12 earnings.
Any positive indication to earnings growth in 2H12 could potentially result in an upward re-
rating for the stock.
Low foreign ownership
UEM Land is under-owned by foreign investors at 15%, below the average foreign
ownership of 23% in the Malaysia market. Currently, SP Setia’s foreign ownership is only
a few notches above UEM Land. However, at its peak in 2006, foreign investors had a
56% stake in SP Setia and achieved the best share price performance (increased by 56%)
since year 2000. We attribute the low foreign shareholdings to skeptics who have yet to
appreciate the full potential of Nusajaya, the benefits of warmer Malaysia-Singapore ties
and a lack of foreign broker coverage. We expect to see a pick-up in foreign interest as
Nusajaya begins to gain traction.
Figure 44: Foreign shareholdings
52
42 41
37 35
33 30
28 27 27 23 23
21 21 19 18 18 18 17 16 16 15
13 13 12 12
-
10
20
30
40
50
60
Air
Asi
a
Gen
ting
IJM
Gen
ting
M's
ia
CIM
B
Alli
ance
Gam
uda
Pub
lic B
k
BA
T
Axi
ata
YT
L
Mar
ket
Sun
RE
IT
Tel
ekom KLK
BJT
OT
O
SP
Set
ia IOI
Sim
e
Bur
sa
May
bank
UE
M L
and
Tan
Cho
ng
DiG
i
Pos
M's
ia
Max
is
Source: Company data
Under-researched
UEM Land is covered by 16 analysts of which only five are from foreign brokerages
compared with 23 analysts covering SP Setia with nine foreign brokerages. We expect
broker coverage to pick up once we see current government and private proposals in
Nusajaya being implemented.
Phase 2-‘Gerbang
Nusajaya’ targets to attract
Singaporeans
Street consensus is 16%
below UEM Land’s FY12
KPI target of RM422 mn
Under-researched stock
with only 16 analysts
covering versus 23 covering
local peers
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 21
Negatives known and priced in
■ Datuk Dr Tong Kooi Ong’s departure
We believe one of the major factors weighing down the stock is the imminence of Datuk
Tong Kooi Ong’s departure when the RCPS expires on 4 January 2013. The departure of
Datuk Tong would seem to impact UEM Land negatively as it would mean a loss of
expertise and knowledge as well as possible exodus by ex-Sunrise employees currently
with UEM Land. However, with the share price trading at a 14% discount to RCPS’
conversion price of RM2.30, we believe this uncertainty has been priced into the stock.
The market is worried that Datuk Tong’s departure might jeopardise the execution of the
developments in Nusajaya. However, demand in Nusajaya, as we have shown above, is
mainly driven by macro factors and changes in both Malaysia and Singapore government
policies, which are mainly G-to-G driven.
Moreover, in a short span of two years, Datuk Tong has contributed to the planning and
strategy of UEM Land’s development in Nusajaya, especially in the Phase 2 master plan
‘Gerbang Nusajaya’, possibly the final phase of Nusajaya’s development. Even with his
departure, Datuk Tong will leave his ‘footprint’ behind and we expect UEM Land to remain
faithful to Datuk Tong’s contribution and vision. As such, UEM Land stands to inherit a
good, if not excellent, plan but will have to execute it accordingly.
In our opinion, Khazanah, UEM Land’s major shareholder via UEM Group, plays an even
bigger role in ensuring the realisation of Nusajaya. Iskandar Malaysia is an initiative hand-
picked by Malaysian government and spear-headed by the Malaysia government’s
investment arm, Khazanah Nasional Berhad (Khazanah).
Khazanah manages RM45.5 bn worth of assets as at December 2011 and the property
sector is its third largest portfolio, constituting 14% of its total assets. One of its largest
property assets is the 2,231-acre Medini Iskandar. The development has an estimated
gross development value of US$20 bn over 15-20 years.
Further, Khazanah owns a 65% stake in UEM Land, which constitutes 7% of total market
capital of Khazanah’s holdings in listed companies. Including UEM Land’s land bank in
Nusajaya, Khazanah owns close to 11,000 acres worth of land in Nusajaya.
Given the high stakes in terms of reputation and investment risk, we believe the Malaysian
government and Khazanah have vested interest to ensure that Nusajaya is a success.
Being a sovereign entity, Khazanah has direct access to G-to-G negotiations for economic
collaboration or investments between Nusajaya and Singapore, therefore impacting
demand in Nusajaya directly. We view Nusajaya as ‘too big to fail’ for Khazanah and as
such, Khazanah will put its weight behind UEM Land.
Figure 45: Khazanah's Investment Portfolio as at 29 April
2012
Figure 46: Khazanah’s investments in listed companies –
owns a 65% stake in UEM Land, 7% by market value
Media & Comms
23%
Financial19%
Property14%
Others12%
Utilities11%
Infrastructure & Construction
9%
Healthcare5%
Transportation & Logistics
5%
Automotive1%
Leisure & Tourism
1% Agriculture0%
Source: Khazanah Annual Review 2012 Source: Bloomberg
Datuk Tong has contributed
the master plan of ‘Gerbang
Nusajaya’… UEM Land to
execute accordingly
Khazanah will take on a
parenting role as the project
is deemed ‘too big to fail’
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 22
■ Potential large cash outlay due to the redemption of RCPS in January 2013
The Redeemable Convertible Preference Shares (RCPS), which was issued in 2010 to
acquire Sunrise, will be expiring on 7 January 2013. There is approximately RM400 mn
worth of unconverted RCPS. This raises cash flow concerns—whether UEM Land would
struggle with a substantial cash outlay if a large amount of RCPS holders redeem now that
the share price is substantially below the conversion price of RM2.30.
We understand that management is looking to raise financing of up to RM2 bn. Proceeds
from the loan will be used partly to finance cash redemption of RCPS, partly to refinance
existing loans with high interest rates and the remaining (estimated to be RM1.0-1.5 bn)
will be used to finance new projects. The full drawdown of the loan could potentially raise
the gearing ratio to 0.31-0.43x from the current 0.15x as at June 2012 (vs. the industry
average of 0.21x).
■ Uncertainties surrounding Malaysia’s general elections
The increase in opposition party’s popularity among voters in recent years and Prime
Minister’s hesitation to call for the next general election due in March 2013 has dampened
the price performance of most government-linked companies, such as UEM Land, as
investors take a ‘wait and see’ approach. The market’s view is that the ruling party,
Barisan Nasional, will remain in power but with a weaker mandate. Johor, being one of
Barisan Nasional’s strongholds, poses less political risk relative to other states. As such,
we see the overhang in share price as a good entry point for potential upside when the
uncertainty of the general elections is finally settled. In any case, we believe that the
opposition party is also supportive of stronger ties with Singapore. Hence, there should not
be any election overhang on UEM Land.
■ Lack of visibility of potential FDIs in Nusajaya
We have seen the realisation of earlier committed foreign investments such as Legoland,
foreign education institutions. However, we lack visibility on new mega FDIs in Nusajaya
that could drive demand in the area. We expect investments from Singapore, such as the
rollout of Khazanah-Temasek’s Wellness Project and private investments from Singapore
to be the next major catalysts.
RCPS expiring on 7 January
2013; refinancing may raise
gearing
Overhang from general
election uncertainties but we
believe little political risk
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 23
Valuation Using the RNAV model, we derive a target price of RM2.85 by applying a 20% discount to
RNAV due to the long gestation period for a large tract of land bank in a relatively new
area, and our cautious outlook on the overall property market and uncertainties in the
management team after the expiry of RCPS. Target price of RM2.85 implies 56% potential
upside and a gross land price of RM50/sq ft.
Our RNAV model is based on:
Estimating NPV of the profits for ongoing projects, and
Assigning specific valuation for the undeveloped land bank based on land usage
zoning and relevant transacted prices within the vicinity and management guidance.
Figure 47: Summary of UEM Land's RNAV
Value (RM mn)
Net surplus from land bank 8,000.9
UEM Land's NAV 4,836.4
NBV of ongoing projects 2,937.1
RNAV 16,722.4
RNAV / share 3.56
Target price @ 20% discount 2.85
Average gross land price / sq ft (RM) 50
Source: Credit Suisse estimates, Company data
Impact of RCPS conversion on RNAV/share
We analyse below the impact of RCPS when it expires on 4 January 2013 on the RNAV /
share below. RCPS holders have three options to choose from by December 2012:
Cash option: Redeem the RCPS with a cash of RM1 for each RCPS
Convert to shares (default option if RCPS holders do not make a selection): Convert
the RCPS to UEM Land’s shares at a conversion price of RM2.30
Convert + cash: Convert one RCPS with additional cash of RM1.30 for one UEM Land
share
Figure 48: Impact of RCPS on RNAV / share when it expires
RNAV / share (RM) TP @ 20% discount
Impact of RCPS when it expires to RNAV / share:
Option 1: RCPS fully redeemed with cash 3.56 2.85
Option 2: RCPS fully converted to shares 3.53 2.82
Option 3: RCPS fully converted to shares with additional cash 3.60 2.88
Source: Credit Suisse estimates, Company data
Sensitivity analysis of UEM Land’s RNAV
Given undeveloped land bank constituting half of RNAV calculation, we calculate the
sensitivity of UEM Land’s RNAV per share to land price changes. The table below shows a
1% change in land prices translates into a 0.6% change in RNAV per share or a RM1
change in land prices translates into a 1.2% change in RNAV per share. Property prices in
Nusajaya have been growing at an average of 19-24% p.a. If we assume the same level of
growth on land prices, the share price could potentially grow to RM3.97-4.07, which is
twice the current share price.
Target price of RM2.85 with
potential upside of 56%,
implied gross land price of
RM50/sq ft
RM1 increase in land prices
translates to a 1.2% change
in RNAV per share
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 24
Figure 49: Sensitivity analysis of RNAV per share with different land prices
-40% -30% -20% -10% Current +10% +20% +30% +40%
Gross psf value (RM) 30 35 40 45 50 55 60 65 70
Value of landbank (RM'mn) 7,408 8,643 9,878 11,112 12,396 13,582 14,816 16,051 17,286
Net surplus from landbank (RM'mn) 4,260 5,186 6,112 7,038 8,001 8,890 9,816 10,742 11,668
RNAV (RM'mn) 11,633 12,559 13,485 14,411 15,374 16,263 17,189 18,115 19,042
RNAV per share (RM) 2.69 2.90 3.12 3.33 3.56 3.76 3.98 4.19 4.40
% change -24.3 -18.3 -12.3 -6.3 0.0 5.8 11.8 17.8 23.9
Source: Company data, Credit Suisse estimates
Figure 50: Selected major land transactions in Nusajaya
Seller Year Price (RM mn) Acreage Price/sq ft (RM)
SiLC (Industrial Land)
Average price transacted for 2007 UEM Land 2007 20.5
Average price transacted for 2008 UEM Land 2007 20.9
Average price transacted for 2009 UEM Land 2007 24.2
Average price transacted for 2010 UEM Land 2007 26.3
Average price transacted for 2011 UEM Land 2007 31.0
Commercial
AEON SP Setia 2007 107.0 37.8 65.0
Puteri Harbour (Waterfront commercial & residential)
Limitless Holdings PTE LTD UEM Land 2008 241.8 111.0 50.0
Themed Attractions and Resorts UEM Land 2009 26.7 4.2 145.0
UM Land UEM Land 2010 67.8 9.2 170.0
Encorp Berhad UEM Land 2010 25.9 3.3 180.0
Tiong Nam UEM Land 2011 220.0
Foreign Developer UEM Land 2012 93.0 7.8 275.0
Mix
Khazanah Nasional UEM Land 2007 1430.3 4500.0 7.3
Middle East Consortium Khazanah 2007 4100.0 2230.0 42.2
Nuri Merdu (Khazanah-Temasek JV) Khazanah 2011 350.0 210 38.3
Semarah Cahaya (Khazanah-Sunway JV) Global Capital & Dev 2011 745.0 692 24.7
Zhouda Real Estate Group Khazanah 2011 157.6 17.9 201.8
70.8 9.6 168.8
Source: Company data, Credit Suisse estimates
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 25
Trading well below historical levels
UEM Land’s share price currently trades at a 47% discount to RNAV, just slightly lower
than 1 standard deviation below the historical average. The market-implied land price at
RM11/sq ft is close to the land prices transacted in 2007 which is way below current
transacted land prices in Nusajaya.
Figure 51: P/RNAV at 1 standard deviation below the
historical average
Figure 52: Market-implied land price at a historical low,
close to land prices transacted in 2007
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Dec
08
Mar
09
Jun
09
Sep
09
Dec
09
Mar
10
Jun
10
Sep
10
Dec
10
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Average = 0.68x
0.47x- 1 Std Dev = 0.50x
+ 1 Std Dev = 0.85x
0
10
20
30
40
50
60
Jul 1
0
Sep
10
Nov
10
Jan
11
Mar
11
May
11
Jul 1
1
Sep
11
Nov
11
Jan
12
Mar
12
May
12
Jul 1
2
Sep
12
RM11
Source: Credit Suisse estimates, Thomson Analytics Source: Credit Suisse estimates
Trading at P/E and P/B levels close to IPO
UEM Land trades at one-year forward P/E of 17.2x, at one standard deviation below the
historical mean. Current P/E has fallen 51% from the historical high. Trailing P/BV at 1.6x
is lower than one standard deviation below the historical average and below local peers’
average of 1.7x. Current P/E and P/BV levels are close to the levels when UEM Land was
first listed at RM0.50/share in November 2008, which we believe is a good entry point now
that current developments are moving in favour for Nusajaya.
Figure 53: P/E at 1 standard deviation below the historical
mean
Figure 54: PB below 1 standard deviation below the
historical mean
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Dec
08
Mar
09
Jun
09
Sep
09
Dec
09
Mar
10
Jun
10
Sep
10
Dec
10
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Sep
12
Average = 23.4x 17.2x
+1 Std Dev = 29.5x
- 1 Std Dev = 17.3x
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Dec
08
Mar
09
Jun
09
Sep
09
Dec
09
Mar
10
Jun
10
Sep
10
Dec
10
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Sep
12
Average = 2.4x 1.6x
+1 Std Dev = 3.1x
-1 Std Dev = 1.7x
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Market-implied land price at
RM11, an 80% discount
from land value
Trades on P/E of 17.2x, at 1
standard deviation below
the historical mean
Trades on P/BV of 1.6x
below local peers of 1.7x
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 26
What has changed?
The Nusajaya story has been told several times since its inception and investors had been
disappointed in the past with the lack of ‘ingredients’ to draw interests in Nusajaya and
mostly wondered whether it would remain just a story. However, a lot has changed over
the past two to three years and we believe the progress will only pick up from here.
Figure 55: What has changed...
Then (3-4 years ago) Now
1) Malaysia-Singapore G-to-G relationship
- “love-hate” relationship - Improved bilateral relationships since May 2010 Leaders Retreat
- unresolved legacy issues which is often the main - Three major legacy issues finally resolved
cause of "squabbles" between the two countries Pedra Branca territorial dispute
Water issue
Railway land dispute
- Khazanah and Temasek JV to develop land in Singapore and Nusajaya
- Point of Agreement (POA) between Malaysia and Singapore progressing well
(refer to Figure 57)
2) Demand from Singapore
- little or no interests from Singapore - About 50% property buyers are foreigners, majority from Singapore
3) Catalyst projects
- no catalyst projects - Catalyst project started operations with more to come
Educity - Marlborough College, The University of Southampton, Newcastle
University Medicine Malaysia and etc
Theme parks such as Legoland and Puteri Harbour Family Indoor Theme
Park
Pinewood Studios
Hospitals - Gleneagles Hospital and Colombia Asia Hospital
Shopping - Mall of Medini, China Mall
AutoCity
4) Infrastructure
- no infrastructure - The Coastal Highway reducing travel time from Nusajaya to Johor Bahru to 20
minutes from 40-45 minutes
- Rapid Transit System (RTS) link between Johor Bahru and Singapore
- Ferry Terminal and CIQ at Puteri Harbour (early 2013)
- Reduction of toll rates by 30% at the Second Link Highway (to Singapore)
- Public bus service which stops at Puteri Harbour
5) Government incentives to encourage investments in Iskandar Malaysia
- no government incentives - 15% tax rate for knowledge workers in Iskandar Malaysia
- Flagship Incentives Iskandar Malaysia (FIM) - tax incentives for selected sectors
- Incentives to companies operating in approved areas of Iskandar region
Source: IRDA, Credit Suisse, news articles, Company data
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 27
Figure 56: Progress on Joint Statement from Singapore-Malaysia Leaders’ Retreat of 24 May 2010
Collaborations/Initiatives Progress Achievement
Cross-border scheduled bus services to double with
introduction of eight new additional routes (four from each
side)
Five new cross-border bus services have been implemented
since September 2010 (including routes to Changi Airport and
RWS)
Ongoing
Liberalisation of cross border taxi services being allowed to
pick up and drop of passengers from any location on the
domestic leg
Implemented effective June 2012 Achieved
Implementation of Malaysian Automated Clearance System
(MACS) to facilitate cross-border immigration clearance for
frequent travellers between the two countries
Implemented in 2009 to Singaporeans only
Effective 22 January 2011, MACS is open for all Singaporeans,
Singapore PRs and holders of long term visit pass and removed
"regular JB visitor" condition for applicants. Also, MACS users do
not need to submit the white card upon entry to Malaysia
No. of users improved to 167,083 as at April 2012 from 1,120 in
2009
Achieved
Toll charges for the Second Link will be significantly reduced
at both Singapore (Tuas Checkpoint) and Malaysia
(Linkedua) custom/toll booths
Toll charges were reduced by 30% effective 1 August 2010.
Traffic has increased by 10% since reduction of toll rates
Achieved
KTMB station will be relocated from Tanjong Pagar to the
Woodlands Train Checkpoint (WTCP) by 1 July 2011
KTMB station was closed down on 1 July 2011 Achieved
M+S Pte Ltd (60:40 Khazanah-Temasek JV) to develop four
parcels of land in Marina South and two parcels of land in
Ophir-Rochor, following the KTM land swap
M+S submitted designs for both developments for planning
approvals during Joint Meeting Committee (JMC) held in January
2012.
A ground-breaking ceremony of Marina One (Marina South) was
held on 11 July 2012. M+S targets to launch in September an
integrated commerce, retail and premium residential space with
GDV of S$7 bn (GFA of 341k sq m), to be completed by 2017.
UEM Land and Mapletree have been appointed as project
managers.
Ongoing
Rapid Transit System (RTS) link between Tanjung Puteri,
Johor Bahru and Singapore will be jointly developed. The
rapid transit system link will be integrated with public
transport services in both Johor Bahru and Singapore.
Targets to be operational by 2018.
Currently in Phase 1, undergoing architectural and engineering
consultancy study by consortium of AECOM Singapore, AECOM
Perunding and SA Architects expected to complete by end-2012.
Among the suggestions to be studied include an undersea tunnel
for vehicles only or for both rail and vehicles.
Ongoing
RTS will have a single co-located CIQ facility in Singapore
with the exact location to be detemined later.
Undergoing feasibility study Ongoing
Pulau Indah Ventures (50:50 Khazanah-Temasek JV)
company to undertake the development of the iconic
wellness township in Iskandar Malaysia - five-acre "Urban
Wellness" in Medini North and the 210-acre "Resort
Wellness" development in Medini Central
Models and concept plans for the Urban Wellness and Resort
Wellness were unveiled to both Prime Ministers of Malaysia and
Singapore during JMC held in January 2012 with an estimated
GDV of RM3 bn.
Capitaland and E&O have been appointed as project managers
for Urban Wellness and Resort Wellness respectively.
Construction is scheduled to begin in 2013 for four to five years.
Ongoing
Source: Company data, Credit Suisse estimates, news announcements
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 28
Key risks In our view, the key risks for UEM Land that could derail our investment case are:
■ Management and execution risk – As a new developer, UEM Land acquired a well-
established property developer, Sunrise, in 2010 for its brand name and experience. It
has been almost two years since the acquisition and we have seen encouraging
influence spillover from Sunrise’s expertise in UEM Land’s plans and execution. After
the merger, key personnel from Sunrise were very quickly appointed as key operating
officers in UEM Land managing most of the major projects in the company. With Datuk
Tong leaving, RCPS expiring and the overdependence on ex-Sunrise staff, any loss of
ex-Sunrise key personnel will be a major setback for UEM Land. This could potentially
lead to increased execution risk of upcoming planned developments, which is still
crucial to garner investor confidence in Nusajaya.
■ Malaysia-Singapore relations – The success of Iskandar Malaysia hinges on the
warming relationship between Malaysia and Singapore leading to better connectivity
and economic collaborations between the two countries. Any risk to this new improved
relationship could negatively impact the development of Iskandar. However, from the
progress of the partnership, we believe the risk is minimal.
■ Global recession – A large-scale development such as UEM Land requires a lot of
foreign investments. In the event of a global recession, expansion and investment
decisions might be put on hold, thus delaying much needed investments into
Nusajaya.
■ At risk to be removed from FBM KLCI – UEM Land is now the only property
company in FBM KLCI. However, with the recent success of a few mega IPOs in
Malaysia and potential IPOs, UEM Land is now at risk to be removed from FBM KLCI.
Based on Credit Suisse’s estimates, the two possible companies to make way for the
inclusion of Felda Global Ventures (FGVH) and other large IPOs, would be Malaysia
Marine and Heavy Engineering (MMHE) and UEM Land.
Increased execution risks if
key ex-Sunrise staff leave
Malaysia-Singapore
relations is crucial
Pro-longed global recession
slows down investment
plans
UEM Land at risk to be
removed from FBM KLCI
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 29
Companies Mentioned (Price as of 19 Oct 12)
Capitaland (CATL.SI, S$3.27, OUTPERFORM, TP S$3.70) City Developments (CTDM.SI, S$11.78, OUTPERFORM, TP S$13.39) IJM Land Berhad (IJML.KL, RM2.13, NEUTRAL, TP RM2.30) Keppel Land (KLAN.SI, S$3.44, NEUTRAL, TP S$3.72) Mapletree Logistics Trust (MAPL.SI, S$1.16, OUTPERFORM, TP S$1.30) SP Setia (SETI.KL, RM3.60, NEUTRAL, TP RM3.60) UEM Land Holdings Bhd (ULHB.KL, RM1.83, OUTPERFORM, TP RM2.85)
Disclosure Appendix Important Global Disclosures
I, Danny Goh, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
See the Companies Mentioned section for full company names.
3-Year Price, Target Price and Rating Change History Chart for ULHB.KL
ULHB.KL Closing
Price
Target
Price
Initiation/
Date (RM) (RM) Rating Assumption
09-Jul-10 1.52 2 O X
27-Sep-10 2.02 2.6
12-Nov-10 2.37 3.6
11-Jan-11 3.04 3.7
28-Feb-11 2.7 3.8
04-Jun-12 X
2
3
44
4
09-Jul-10 04-Jun-12
O
1
1.5
2
2.5
3
3.5
Closing Price Target Price Initiation/Assumption Rating
RM
O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities.
As of October, 2 2012 Analysts’ stock rating are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% or more, (depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.
Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.
22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 30
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See the Companies Mentioned section for full company names. Price Target: (12 months) for (ULHB.KL) Method: Our target price of RM2.85 for UEM Land is based on our RNAV estimate by assigning an average price of RM50psf for the UEM Land's land bank in Nusajaya. The RM50psf was derived by taking the weighted average land price based on land usage. Risks: The downside risks to our 12-month RM2.85 target price for UEM Land are 1) Breakdown in Malaysia-Singapore relations which will hurt sentiment for Iskandar 2) Hard landing or severe recession, which could delay investments in Iskandar 3) Key ex-Sunrise staff leaves. Upside risks to our target price 1) Singapore developers investing in Nusajaya, 2) confirmation of RTS, 3) easier immigration process and 4) success of catalyst projects and unveiling of new ones
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See the Companies Mentioned section for full company names. The subject company (ULHB.KL) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (ULHB.KL) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (ULHB.KL) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (ULHB.KL) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (ULHB.KL) within the next 3 months.
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22 October 2012
UEM Land Holdings Bhd
(ULHB.KL / ULHB MK) 31
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22 October 2012
Asia Pacific/Malaysia
Equity Research
PY0640-new.doc
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