UEM Sunrise Bhd (UEMS) reported a core net profit of RM16.9 million for 2Q24, a notable improvement of 143% quarter-on-quarter but a decline of 26% year-on-year. This brings the core net profit for the first half of 2024 to RM23.9 million, reflecting a 32% decrease from the previous year and falling short of expectations at 24% of Bloomberg consensus and 27% of internal forecasts.

In light of these results, analysts from CGS, RHB and Maybank have issued various recommendations. An analyst maintains a BUY call with a target price of RM1.60, highlighting a 61% potential upside. The firm expects stronger earnings in the second half of the year due to an increase in new launches and potential non-core asset sales. On the other hand, an analyst reiterates a REDUCE rating with a target price of RM0.75, reflecting concerns over UEMS's performance despite its strategic landbank and ongoing sales. Additionally, a third analyst has downgraded the stock to HOLD with a target price of RM1.00, citing weak earnings and limited upside potential.

The weaker-than-expected performance in 1H24 is attributed to a drop in revenue to RM430.2 million, down 29% year-on-year. This decline stems from lower contributions from the property development segment and a 28% fall in land sales compared to the previous year. The decrease in profit margins, as evidenced by a 2 percentage point drop in EBIT margin, further impacted the results.

Despite these challenges, UEMS secured RM502.4 million in new property sales during 1H24. The company remains on track to achieve its full-year sales target of RM1.0 billion, although this target is lower compared to the previous year's RM2.1 billion, which included significant contributions from Collingwood in Melbourne. The firm is expected to benefit from upcoming launches and potential gains from land sales in East Ledang, Johor.

Looking ahead, UEMS's unbilled sales remain robust at RM2.7 billion, providing a cushion for future revenue. The company is also set to ramp up new project launches in the latter half of the year, with planned projects worth approximately RM430 million already underway. This includes high-demand properties such as Aspira LakeHomes and new developments in the southern region.