UEM Sunrise to maintain property prices despite costs hike

by S BIRRUNTHA / pic by TMR FILE

UEM Sunrise Bhd said it has no plans of increasing its sales pricing strategy this year, despite the hike in construction costs.

CEO Sufian Abdullah (picture) said the property developer had not been significantly affected by the increase in building material prices and was still able to absorb the increase.

He added that the hike in construction costs is something that the group had expected, and it has no impact on the group’s property prices this year.

“However, we will continue to monitor the construction cost closely, and will ‘fine-tune’ the property prices instead of revising them.

“We have seen a considerable increase in terms of construction materials. Given the volatility of material prices, this is something that we are constantly looking at and something that we are constantly monitoring,” he said during a media briefing on the group’s first quarter of 2022 (1Q22) performance today.

According to Sufian, the group is dealing with the construction cost hike through effective risk management, by allowing its business partners, suppliers, vendors and contractors to assume a considerable amount of risk.

He noted that the group is going forward with cost certainty, which will mitigate the risk of fluctuations over the course of construction, rather than aiming for cost savings with cost-cutting exercises.

Overall, Sufian anticipates the group to remain profitable in the financial year 2022 (FY22), backed by unbilled sales of RM2.2 billion.

“For FY22, we will remain positive for the remainder of the year. We have ongoing projects that will be coming on stream and land sales.  

“On top of that, our retail has returned to profitability, compared to the last two years when we could not collect rent.  

“All these things are helping us narrow the loss that we incurred last year and I think the profitability will be sustainable this year,” he added.

Touching on the recent hike in the Overnight Policy Rate, Sufian said the group is not expecting a significant impact on sales as the rate is still low in comparison to the pre-pandemic level.  

He said furthermore, the majority of the products available in the market have been competitively priced, while most buyers are owner-occupiers.  

“Taking advantage of the current environment, we are reinforcing the launches of our new product pipelines and will continue to provide attainable products for our buyers and market at large,” he said.

Sufian also noted that the group will continue its landbank portfolio by rebalancing and embedding the sustainability agenda within the organisation to future-proof new launches and future products.

He added that the group is positive about the nation’s transition into endemicity, however, in view of the global political uncertainties which may impede economic activities, and the rising raw materials cost, it retains a cautiously optimistic stance.  

Despite the challenges, UEM Sunrise maintains its sales and gross development value (GDV) targets of RM1.5 billion and RM3.3 billion respectively for 2022.

The group launched projects worth up to RM74 million in GDV in 1Q22.

On Wednesday, the property developer announced that it returned to the black in 1Q22 by achieving a net profit of RM19.02 million against a net loss of RM4.32 million a year ago.

The higher earnings were underpinned by higher gross profits, improvements in its share of results from associates and joint ventures, mainly from Nusajaya Tech Park and Horizon Hills in Iskandar Puteri, as well as higher foreign exchange gain.

Quarterly revenue surged 64.81% to RM416.45 million from RM252.69 million previously, mainly driven by local property development activities and the sale of 19 industrial plots in Phase 3 of the Southern Industrial and Logistics Clusters in Iskandar Puteri, Johor.

As a result, the group registered earnings per share of 0.38 sen for the period compared to a loss per share of 0.09 sen a year ago.

In a research note today, Public Investment Bank Bhd has maintained a ‘Neutral’ stance on UEM Sunrise with an unchanged target price of 38 sen.

The research house said the group’s headline net profit came in within its estimates though above consensus at about 26% and 52% of full-year estimates respectively.

At 12.29pm, UEM Sunrise shares rose half a sen or 1.54% to 33 sen, valuing the group at RM1.67 billion.