PROPERTY developer UEM Sunrise Bhd is on a roll. Not only did the company exceed its 2017 sales target of RM1.2 bil by RM300 mil, it also doubled its net profit after tax from RM147.3 mil to RM290.1 mil.
Moreover, the company is all geared up for better results given that phase one of its 92-storey Aurora Melbourne in Melbourne, Australia, which has a gross development value (GDV) of RM2.4 bil, will be completed at year-end.
UEM Sunrise managing director and CEO Anwar Syahrin Abdul Ajib notes that the company adopts the Malaysian Financial Reports Standard 15 (MFRS 15), which only allows revenue recognition for its international projects upon their completion.
“As phase one is to be completed at the end of this year, we will be able to recognise the revenue from Aurora Melbourne,” he says. “The first 32 storeys will be handed over to the buyers and we will be able to recognise this revenue.”
Anwar points out that UEM Sunrise’s overseas projects are funded by loans which have pushed up the company’s borrowings and net gearing ratio over the last few years.
In fact, CIMB Equities Research notes that the company’s net gearing ratio increased to 48% in April from 44% as of end-2017.
“There is concern that our borrowings have pushed up net gearing ratio but the revenue from Aurora will reduce this,” he tells FocusM, adding that this also frees up the company’s cash flow.
He says the positive response to its three Australian projects has prompted the developer to seek out more land in Australia for future projects. The company is selective in acquiring land in Australia, for which it has set a limit of RM300 mil, as any development “Down Under” has to be funded by borrowings, he says.
Apart from Aurora Melbourne, UEM Sunrise has two other projects in Australia – the RM1 bil Conservatory and the RM1.1 bil Mayfair – both in Melbourne.
The Conservatory, which was launched in August 2015, is a 42-storey building consisting of 446 residential units with ground level pedestrian entry and lobby, and 3,229 sq ft of retail space and 123 parking bays.
UEM Sunrise’s third Melbourne project Mayfair is a 21-storey block, designed by British architecture firm Zaha Hadid Architects and comprises 158 apartments, a 62-seat restaurant and a 1,464 sq ft café.
Up to 90% has been sold for The Conservatory while high-end Mayfair has a take-up of over 40%.
At home, UEM Sunrise is excited about replicating the success of Solaris Dutamas and Mont’ Kiara with a development in Kepong for which it has acquired 29.4ha of prime land parcels from Kuala Lumpur City Hall (DBKL).
The land was acquired for RM416.4 mil via a joint venture arrangement with a private developer, Mega Legacy Equity Sdn Bhd.
An integrated mixed residential and commercial development with an estimated GDV of RM15 bil is expected to be built in this location over a period of 15 years.
Hong Leong Investment Bank Bhd analyst Lee Meng Horng is positive about the proposal as it is expected to increase the group’s effective GDV by 6.9% to RM117 bil.
“The acquisition bodes well with the strategy of the company to increase its presence in the Klang Valley.
“Given the strategic location and size of the plots along with UEM Sunrise’s track record in Mont’ Kiara, we believe the development should contribute positively to the group in the future,” he says.
UEM Surise is currently planning for the development and hopes to submit the plans soon so that it can launch the first phase, which is the residential component, by next year, says Anwar.
In addition to the Kepong project, UEM Sunrise has also acquired 7.8ha of land in Equine Park in December last year. “Plans are also underway with a target to launch it in 2019. The company is looking to acquire more land in the central region,” he says.
In March, UEM Sunrise launched its first RUMAWIP in the Federal Territory of Kuala Lumpur – the RM217.5 mil Kondominium Kiara Kasih in Segambut. RUMAWIP, short for Rumah Wilayah Persekutuan, is an affordable housing programme for first house buyers who have lower or moderate incomes. It focuses on only Wilayah Persekutuan Kuala Lumpur, Putrajaya and Labuan.
Interestingly, Kondominium Kiara Kasih is doing reasonably well since its launch, with sales inclusive of bookings to-date reaching close to RM82 mil, says Anwar.
“We are pleased with the performance of our new project launches. In February this year, we launched Serimbun in Iskandar Puteri – a double-storey landed residential development with a total GDV of RM139.3 mil and starting price of RM630,000 per unit – and to-date, sales inclusive of bookings have already touched RM104.9 mil.
“Other ongoing developments are also progressing well. They include Almas and Estuari Gardens, both in Puteri Harbour, Denai Nusantara, Sefina Residences and Residensi Solaris Parq in Mont’ Kiara as well as Serene Heights Bangi in Selangor,” he says.
In addition to affordable products, UEM Sunrise also focuses on mid-market developments, namely those priced from RM500,000 to RM1 mil per unit in both the southern and central regions.
“We know there is a market for affordable landed property based on our own experience,” Anwar says.
One of the issues in the Johor property market is the insufficient supply of affordable housing that is faced by most middle-income earners, according to Sivadas Velayudhan, who is from the property surveying division of the Royal Institution of Surveyors Malaysia.
“It is not the entire property market that is in an unhealthy state. It is only certain segments. For example, in Iskandar Malaysia, the high-end high-rise waterfront developments are in oversupply for now,” he says.
Other apartments in the RM300 to RM450 psf range appear well supported by demand. This is primarily due to the lack of supply of new landed property launches below the RM400,000 price range.
Government-linked companies (GLCs) which are property developers with landbank in city outskirts should start to develop new townships with a high proportion of landed housing that are affordable for the masses, and not be purely profit-oriented, says Sivadas.
“They must set the benchmark to push private developers to reduce prices,” he says. “There is an urgent need to provide more housing that is affordable to the masses, closer to the city centre and commercial centres.”
Committed to meet demand
UEM Sunrise aims to push the boundaries further in the coming years to offer unique lifestyles to the market, says Anwar.
“Going forward, we will continue to be committed to enhance our business via strategic approaches by focusing on meeting the current market demand; monetisation of assets and rebalancing of portfolio; increasing our presence in the central region; creating vibrancy in Iskandar Puteri; and building and differentiating the brand through customer-centric experience,” he says.
UEM Sunrise chairman Tan Sri Zamzamzairani Mohd Isa says: “UEM Sunrise remains committed to discharging its responsibility. We will strive to contribute our level best on the company’s growth while supporting the government.
“The company has grown (for) close to 50 years now and with combined years of experience, it has built strong and sustainable communities and grown from strength to strength, which have helped to position us as one of the leading property developers in the country and we are ready to deliver another decade of excellence.”
In total, UEM Sunrise is launching RM1 bil worth of properties this year although it has a sales target of RM1.2 bil. The remaining amount will be derived from projects launched last year, says Anwar.
A property analyst says this is prudent of the developer as it is focused on monetising what is already in progress or completed.
“Rather than launching and building more properties which would increase the stock in hand, concentrating on marketing activities to reduce its unsold units would free up its tied-up cash.
“And the expenditure for these unsold units has already been spent and accounted for, so these units are literally pure profit,” he says.
UEM Sunrise is trying to stoke the flames for its completed properties, the likes of Symphony Hills in Cyberjaya, and Nusa Bayu and East Ledang, both in Iskandar Puteri.
To achieve this, the company has intensified its sales campaign “A New Year, A New Home” which started in February.
Comprising value propositions such as Easy Entry, Easy Place, Easy Move and Easy Privileges, the sales campaign is not only for completed properties, but also for selected on-going projects.
“These inventory monetisation efforts are expected to enhance cashflow position and at the same time, reduce the level of inventory in the company’s balance sheet,” says Anwar.
UEM Sunrise will also continue to expand its rent-to-own scheme through collaboration with commercial banks.
Its EASY Own Plan launched last year helps customers own their own home via an option to rent selected properties for two years at market rate. They can decide to purchase the property within the rental period. FocusM