What can you buy for RM106? A dinner for 2 in a nice restaurant without wine or 55 litres of RON 95 Unleaded petrol for a travel from KL to Penang and from Penang back to Ipoh. Or you can also buy 100 units of UEM Sunrise Bhd from Bursa Malaysia. Sounds like a good option? Well, according to one latest report in a local English daily (12 Sept 2015), the current price per unit is RM1.06 and it is second most active counter this week due to some rumours of a corporate exercise. In terms of valuations, it is also looking attractive. It is only trading at a price-to-earnings of 10 times while forward valuation was 13.25 times, according to Bloomberg data. What is price-to-earnings ration in very easy to understand language? It meant if I buy 100 units at RM106 today. 10 years later, my 100 units should be worth RM212. Yes, doubled. Is this attractive? In simple terms, this is 10% return per year based on it having the exact same profits year after year and same stock price year after year. Not many unit trust agents would dare to promise you double digit returns every year. In fact, the typical rental returns of today is more like the rates of fixed deposits, at 3.5 percent only.
Another very good sign is that the stock’s net asset per share is at RM1.40 indicating that at current price, the stock is still undervalued. How to explain this? Well, in brief, if you buy 100 units today at RM106 and UEM Sunrise Bhd decides to stop its business and sell off all its assets etc, you would get back RM140. Looks good. In terms of gearing, it’s only at 0.285 times. As soon as you check among the usual property developers, you would know that this is very low. Most property developers are much higher, perhaps 0.5 times or higher. Yes, even the top names you usually hear on a daily basis. Lower gearing means lower debts, means better flexibility if they wanted to buy more land or become more aggressive in having more projects.
UEM Sunrise was formed in 2010 with the merger of UEM Land Holdings Bhd and Sunrise Bhd. Sunrise was a famous brand and UEM Land has lots of land bank. Total landbank that it has today is 15,000 acres in Malaysia and overseas but more than three quarters are in Johor. That’s why it is more careful. Read here: UEM-Sunrise, it’s all about work; Johor Of course, this huge land bank in Iskandar meant that the stock price has been battered hard. No one is positive about Iskandar and the Singaporean authorities and many property related sites continue to give warnings to investors to be objective and not rush in unprepared.
Net margin is healthy when we look at the financial year ended Dec 31 2014. Total net profit was RM479.93 million and revenue was at RM2.66 Billion. Net profit margin? 18 percent. This number is on the higher end when compared to the many developers I have written recently. I do not own a single unit of UEM-Sunrise shares. If I do buy, it will only be 3,000 units. Yea, hopefully it can go up slightly, then I can sell for a nice dinner. Haha. As per Warren Buffet, buy undervalued companies and the value would soon be reflected in its share price. I still think the market is way too volatile for newcomers. It’s really scary as there are very few fundamental investors. Everyone buys or sells based on what the bigger players are doing. Thus, I may own at maximum, 3,000 units. Just for fun and perhaps treat like a Fixed Deposit and leave it untouched for some time. Happy investing or skipping.
written on 12 Sept 2015
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