Inside Khazanah's trapped property arm
Languishing returns, constrained dividends and little choices.
Last Tuesday, an equities note from RHB Research positioned Khazanah Nasional’s property firm, UEM Sunrise (UEMS), as a prime candidate for a takeover or privatisation.
Driven by a wave of speculation, UEMS shares rallied nearly 32% in a matter of days, reaching an intraday high of 67 sen before settling at 66.5 sen.
Just like that, over RM809 million was added to the company’s total market value, pushing it to RM3.37 billion.
If you have been covering Corporate Malaysia for as long as I have, you’d chuckle knowing that the note would have caused some comical pandemonium somewhere.
The RHB analyst didn’t specifically name a merger entity or concretely state that an acquisition was going to happen.
I did my 101s and reached out to UEMS and Khazanah for comment but didn’t receive a reply at press time.
But this episode reminded me of three things: a massive geographical advantage that was squandered, a dramatic decade-long reversal of fortunes, and the ghosts of corporate mergers past.
These things, I guess, deserve a revisit. It’s Monday, so why not?
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The bull case for UEMS comes down to one deeply undervalued asset: its 4,516 acres of strategic land in Johor.
With major catalysts like the Johor-Singapore Special Economic Zone (JS-SEZ) and the Rapid Transit System (RTS) Link nearing completion, land prices in Iskandar Malaysia are surging.
Yet, the stock market is currently pricing UEMS’s Johor land at a mere RM13 per square foot, a steep discount compared to its accounting book value of RM1.36 per share.
To put this into perspective: UEMS has indicated that monetising just 1,000 acres of its Johor land could fetch around RM4 billion.
This means that a mere fraction of their land is worth significantly more than the market value of the entire company today.
As the sovereign wealth fund’s property arm, UEMS was handed the ultimate structural advantage, that is the best land in a booming economic corridor.
But, for years, UEMS has struggled to fully capitalise on this head start, allowing more agile, private developers to run circles around them in their own backyard.
Analysts are now banking on the hope that a recalibrated strategy — or a drastic corporate buyout — will finally unlock what they deem as trapped value.
That is the discrepancy between UEMS’ depressed share price and the multi-billion ringgit reality of its raw land assets.