UEM Land Holdings Bhd - Credit Suisse

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22 October 2012

Asia Pacific/Malaysia

Equity Research

Real Estate Management & Development

UEM Land Holdings Bhd

(ULHB.KL / ULHB MK) ASSUMING COVERAGE

Singapore! Nusajaya beckons

■ Assume coverage with OUTPERFORM. We assume coverage on UEM

Land with an OUTPERFORM rating and a new target price of RM2.85, with

56% potential upside.

■ The Singaporeans are coming! Property demand in Nusajaya has

significantly improved, encouraged by the strengthening bilateral ties

between Singapore and Malaysia, leading to Singapore’s ‘buy-in’ on

Nusajaya. Singapore investments in Iskandar Malaysia (manufacturing

sector) increased three-fold in FY11. Residential property prices have grown

67-90% since 2009. The potential entry of Singapore developers could

further underpin the confidence in the country’s buyers and continue to drive

demand upwards.

■ Demand far exceeds supply. We estimate demand for real estate in

Nusajaya is triple that of supply, suggesting a sizeable market for the region.

This demand is primarily driven by two market segments—home-seekers

from jobs created at Nusajaya and migration of Singapore residents

(including retirees) struggling with high cost of living.

■ Good risk-reward proposition. UEM Land trades at a market-implied land

price of RM11, which is 80% below land value and the market-implied

historical peak, and offers attractive reward versus risk (R-cubed ratio = 1.6-

to-1 of P/BV). Key catalysts are: (1) the potential entry of Singapore

developers, (2) the confirmation of Rapid Transit System (RTS) between

Singapore and Johor, (3) an easier immigration process at the border, and

(4) the success of newly opened catalyst projects and unveiling of new ones.

Share price performance

60

80

100

120

140

0

2

4

6

Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the

FTSE BURSA MALAYSIA KLCI IDX which closed at 1666.35

on 19/10/12

On 19/10/12 the spot exchange rate was RM3.05/US$1

Performance Over 1M 3M 12M Absolute (%) 4.6 -12.4 -5.7 Relative (%) 3.3 -13.9 -21.3

Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E Revenue (RM mn) 1,703.2 2,183.3 2,673.4 3,235.4 EBITDA (RM mn) 377.7 502.7 670.2 795.2 EBIT (RM mn) 364.1 498.2 665.0 789.2 Net attributable profit (RM mn) 301.7 388.2 481.9 568.3 EPS (CS adj.) (RM) 0.07 0.08 0.10 0.12 Change from previous EPS (%) n.a. 0 0 0 Consensus EPS (RM) n.a. 0.08 0.09 0.11 EPS growth (%) 24.7 27.5 23.3 17.5 P/E (x) 27.5 21.6 17.5 14.9 Dividend yield (%) 0 1.5 1.8 2.2 EV/EBITDA (x) 23.4 17.6 14.3 12.4 ROE (%) 8.0 7.8 9.2 10.3 Net debt/equity (%) 17.6 16.5 28.7 31.1 NAV per share (RM) — — — — Disc./(prem.) to NAV (%) — — — —

Source: Company data, Thomson Reuters, Credit Suisse estimates.

Rating OUTPERFORM* Price (19 Oct 12, RM) 1.83 Target price (RM) 2.85¹ Upside/downside (%) 55.7 Mkt cap (RM mn) 7,920 (US$ 2,598) Enterprise value (RM mn) 8,838 Number of shares (mn) 4,327.87 Free float (%) 29.0 52-week price range 2.42 - 1.64 ADTO - 6M (US$ mn) 3.2

*Stock ratings are relative to the relevant country benchmark.

¹Target price is for 12 months.

Research Analysts

Danny Goh

603 2723 2083

[email protected]

Malaysia Research Analyst Team

Tan Ting Min

(Head of Research, Plantations, Property)

Danny Goh

(Banks, Infrastructure)

Loke Foong Wai

(Telekoms, Consumer, Gaming)

Annuar Aziz

(Auto, Transport, Utilities, O&G)

22 October 2012


(ULHB.KL / ULHB MK) 2

Focus charts Figure 1: Upward trend from Singapore investments in the

manufacturing sector

Figure 2: Base case—estimated demand could potentially

exceed the supply by three-fold by 2025

0.2

0.80.7

2.0

6%

19%

34%* 34%*

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0.0

0.5

1.0

1.5

2.0

2.5

2010 2011 YTD Apr-12 YTD Apr-12(annualised)

RM

'bn

Investment from Singapore in manufacturing sector (RM'bn)

% of investment from Singapore to total manufacturing investments

FY2012E

(annualised)

+150%YoY

8%

54%

24%

14%

0%

20%

40%

60%

80%

100%

120%

Demand Supply

Job Creation Singapore foreigners

Malaysians Retirees

33% of Demand

Source: Credit Suisse estimates Source: IRDA

Figure 3: Semi-D prices in Nusajaya outperforms Klang

Valley and Johor

Figure 4: Market-implied land price at a historical low,

close to land prices in 2007

90.0

110.0

130.0

150.0

170.0

190.0

210.0

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

UEMLand: Semi-DSubang Jaya, Selangor: Semi-D (yearly numbers only)Bukit Bandaraya, KL: Semi-D (yearly numbers only)Johor: Semi-D

0

10

20

30

40

50

60

Jul 1

0

Sep

10

Nov

10

Jan

11

Mar

11

May

11

Jul 1

1

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul 1

2

Sep

12

RM11

Source: Company Data, Bloomberg Source: Company data, Credit Suisse estimates, Thomson Analytics

Figure 5: P/E at 1 standard deviation below the historical

mean

Figure 6: P/BV below 1 standard deviation below the

historical mean

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Dec

08

Mar

09

Jun

09

Sep

09

Dec

09

Mar

10

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Average = 23.4x 17.2x

+1 Std Dev = 29.5x

- 1 Std Dev = 17.3x

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Dec

08

Mar

09

Jun

09

Sep

09

Dec

09

Mar

10

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Average = 2.4x 1.6x

+1 Std Dev = 3.1x

-1 Std Dev = 1.7x

Source: Company data, Credit Suisse estimates, Thomson Analytics Source: Company data, Credit Suisse estimates, Thomson Analytics

22 October 2012



Singapore! Nusajaya beckons Assume coverage with an OUTPERFORM rating

We assume coverage on UEM Land with an OUTPERFORM rating and a new target price

of RM2.85, with 56% potential upside.

The Singaporeans are coming!

Property demand has significantly improved, encouraged by the strengthening bilateral

ties between Singapore and Malaysia, leading to the Singapore’s ‘buy-in’ on Iskandar.

Foreign investments made up 38% of the RM95.5 bn in total committed investments in

Iskandar Malaysia as at June 2012, with Singapore emerging as the largest investor.

Singapore investments in Iskandar Malaysia (manufacturing sector) increased three-fold in

FY11.

Residential property prices have increased between 67% and 90% since 2009,

outperforming both Klang Valley and Johor, but remained low versus Singapore property

prices (one-sixth to one-third of Singapore property value). Take-up rates of new launches

have accelerated, reaching 60-66% within four to five months of their launch versus an

earlier launch in 2009 which recorded only 23% over the same period.

The long-awaited catalyst projects such as Legoland, and education institutions, including

Marlborough College and Newcastle University of Medicine Malaysia, have finally opened

their doors. We expect more to come soon, thus, invigorating the township.

The potential entry of Singapore developers could further underpin confidence in

Singapore buyers and continue to drive demand upwards.

Demand far exceeds supply

We estimate demand for real estate in Nusajaya is triple that of supply, suggesting a

sizeable market for the region. This demand is primarily driven by two market segments—

home-seekers from jobs created at Nusajaya and migration of Singapore residents

(including retirees) struggling with high cost of living. UEM Land, the largest landowner in

Nusajaya, is likely to be the prime beneficiary of latent demand.

Good risk-reward proposition

UEM Land trades at a market-implied land price of RM11, which is 80% below the market

price and the market-implied historical peak, and offers attractive reward versus risk (R-

cubed ratio = 1.6-to-1 on P/BV). Key price catalysts are:

(1) the potential entry of Singapore developers,

(2) the confirmation of Rapid Transit System (RTS) between Singapore and Johor,

(3) an easier immigration process at the border,

(4) the success of newly opened catalyst projects and unveiling of new ones, and

(5) the expansion of broker coverage.

At such a steep discount to the market price, we believe some of the key concerns have

been fully priced in. Key concerns that have contributed to the stock’s year-to-date

underperformance are:

(1) Datuk Dr Tong Kooi Ong’s imminent departure,

(2) cash flows and gearing concerns following the redemption of RCPS in January 2013,

(3) uncertainty surrounding Malaysia’s general elections, and

(4) a lack of news flow on land transactions.

Target price of RM2.85 with

56% potential upside

Singapore investments

tripled in FY11

Property prices in Nusajaya

have increased 67-90%

Catalyst projects have

commenced operations

Demand is three times of

supply

Market-implied land price is

80% below land value—key

concerns have been fully

priced in

22 October 2012



UEM Land Holdings Bhd ULHB.KL / ULHB MK Price (19 Oct 12): RM1.83, Rating:: OUTPERFORM, Target Price: RM2.85, Analyst: Danny Goh

Target price scenario

Scenario TP %Up/Dwn Assumptions

Upside 3.56 94.54 Price based on RNAV without discount

Central Case 2.85 55.74 RNAV estimate by assigning an average price of RM50psf for the UEM Land's land bank in Nusajaya

Downside 1.23 (32.79) Price based on trough P/B valuation of 1.0x

Key earnings drivers 12/11A 12/12E 12/13E 12/14E

Unbilled sales (RM mn) 1,862 2,691 2,850 3,726 New property sales (RM mn)

2,444 2,346 2,426 3,485 Average selling price for Puteri Harbour (RM psf)

220.0 275.0 302.5 347.9 Average selling price for SiLC (RM psf)

35.0 38.5 42.4 48.7 — — — —

Income statement (RM mn) 12/11A 12/12E 12/13E 12/14E

Sales revenue 1,703 2,183 2,673 3,235 Cost of goods sold — — — — SG&A — — — — Other operating exp./(inc.) 1,325 1,681 2,003 2,440 EBITDA 377.7 502.7 670.2 795.2 Depreciation & amortisation 13.6 4.5 5.2 6.0 EBIT 364.1 498.2 665.0 789.2

Net interest expense/(inc.) 51.4 51.8 108.1 132.4 Non-operating inc./(exp.) — — — — Associates/JV 42.5 40.5 46.9 55.2 Recurring PBT 355.2 486.8 603.9 712.0 Exceptionals/extraordinaries — — — — Taxes 52.3 97.4 120.8 142.4 Profit after tax 302.9 389.5 483.1 569.6 Other after tax income — — — — Revaluations — — — — Minority interests 1.2 1.2 1.2 1.2 Preferred dividends — — — — Reported net profit 301.7 388.2 481.9 568.3 Analyst adjustments — — — — Net profit (Credit Suisse) 301.7 388.2 481.9 568.3

Cash flow (RM mn) 12/11A 12/12E 12/13E 12/14E

EBIT 364.1 498.2 665.0 789.2 Net interest (51.4) (74.0) (135.1) (165.6) Tax paid (43.9) (97.4) (120.8) (142.4) Working capital — — — — Other cash & non-cash items (87.2) (188.1) (248.9) (264.3) Operating cash flow 181.6 138.7 160.3 216.9 Capex (38.0) (20.7) (23.1) (25.6) Free cash flow to the firm 143.6 117.9 137.2 191.3 Acquisitions — — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) — — — — Investing cash flow (424.2) (9.1) (638.9) (311.1) Equity raised 545.0 — — — Dividends paid — — — — Net borrowings 33 15 1,075 510 Other financing cash flow (146.6) (116.5) (653.5) (170.5) Financing cash flow 431.3 (101.5) 421.6 339.5 Total cash flow 188.6 28.1 (57.0) 245.3 Adjustments — — — — Net change in cash 188.6 28.1 (57.0) 245.3

Balance sheet (RM mn) 12/11A 12/12E 12/13E 12/14E

Cash & cash equivalents 632.1 660.3 603.3 848.6 Current receivables 1,020 1,217 1,489 1,802 Inventories 124.5 200.1 245.1 296.6 Properties under development 1,066 1,054 1,400 1,423 Other current assets 272.2 272.2 272.2 272.2 Current assets 3,115 3,403 4,010 4,642 Property, plant & equip. 162.3 178.6 196.4 216.1 Properties under development 2,752 2,719 2,959 3,151 Investment properties 511.1 511.1 511.1 511.1 Investment in Associates/JV 399.7 496.2 599.2 758.9 Intangibles 621.4 621.4 621.4 621.4 Other non-current assets 3,495 3,462 3,702 3,894 Total assets 7,794 8,162 9,130 10,132 Accounts payable 515.8 596.0 659.0 752.5 Short-term debt 51.7 66.7 76.7 86.7 Current provisions 157.3 157.3 157.3 157.3 Other current liabilities — — — — Current liabilities 724.8 820.0 893.0 996.5 Long-term debt 1,512 1,512 2,188 2,688 Non-current provisions — — — — Other non-current liab. 260.7 260.7 260.7 260.7 Total liabilities 2,497 2,592 3,342 3,946 Shareholders' equity 4,836 5,108 5,325 5,723 Minority interests 460.2 461.4 462.6 463.9 Total liabilities & equity 7,794 8,162 9,130 10,132

Per share data 12/11A 12/12E 12/13E 12/14E

Shares (wtd avg.) (mn) 4,724 4,724 4,724 4,724 EPS (Credit Suisse) (RM)

0.07 0.08 0.10 0.12 DPS (RM) — 0.03 0.03 0.04 BVPS (RM) 1.12 1.18 1.23 1.32 NAV per share (RM) — — — —

Key ratios and valuation 12/11A 12/12E 12/13E 12/14E

Growth(%) Sales revenue 263 28 22 21 EBIT 103 37 33 19 Net profit 55.1 28.7 24.1 17.9 EPS 24.7 27.5 23.3 17.5 Margins (%) EBITDA 22.2 23.0 25.1 24.6 EBIT 21.4 22.8 24.9 24.4 Pre-tax profit 20.9 22.3 22.6 22.0 Net profit 17.7 17.8 18.0 17.6 Valuation metrics (x) P/E 27.5 21.6 17.5 14.9 P/B 1.64 1.55 1.49 1.38 Dividend yield (%) — 1.47 1.83 2.15 EV/sales 5.20 4.05 3.58 3.04 EV/EBITDA 23.4 17.6 14.3 12.4 EV/EBIT 24.3 17.7 14.4 12.5 ROE analysis (%) ROE 8.0 7.8 9.2 10.3 ROIC 6.94 6.27 7.63 8.11 Asset turnover (x) 0.22 0.27 0.29 0.32 Interest burden (x) 0.98 0.98 0.91 0.90 Tax burden (x) 0.85 0.80 0.80 0.80 Financial leverage (x) 1.47 1.47 1.58 1.64 Credit ratios Net debt/equity (%) 17.6 16.5 28.7 31.1 Net debt/EBITDA (x) 2.47 1.83 2.48 2.42 Interest cover (x) 7.1 9.6 6.2 6.0

Source: Company data, Thomson Reuters, Credit Suisse estimates.

0

10

20

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80

90

100

Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12

12MF P/E multiple

0

1

2

3

4

5

6

Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12

12MF P/B multiple

Source: IBES

22 October 2012



The Singaporeans are coming! The Iskandar region has made good progress since its inception in 2006 and we finally

see Nusajaya taking shape as the main real estate developer in Iskandar. Investor

sentiment has significantly improved, encouraged by the strengthening bilateral ties

between Singapore and Malaysia, leading to the Singapore’s ‘buy-in’ on Iskandar.

Singapore buying into the Iskandar story

Total committed investments into the Iskandar region reached RM95.5 bn as at June

2012. The two largest segments of investments are manufacturing (34%) and property

(31%). The Iskandar Regional Development Authority (IRDA) expects investments to hit

the RM100 bn mark by year-end. Investment from 2006 to 2010 of RM70 bn was 49%

higher than its targeted RM47 bn. We estimate that by 2025, inbound investments could

be 21% higher than IRDA’s target if investor interest momentum is maintained.

Figure 7: Cumulative investments in Iskandar Malaysia

almost reaching RM100 bn

Figure 8: Cumulative investments in Iskandar Malaysia

almost reaching RM100 bn

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 1H2012

RM

'bn

Government Properties Utilities, tourism and others Manufacturing

11.3

25.8

55.6

41.7

69.5

84.8

95.5

70

26 *47

73

107

155

382

94

127

173

464

0

50

100

150

200

250

300

350

400

450

500

2006-2010 2011-2015 2016-2020 2021-2025 Total (by 2025)

Actual Target Estimates

First 5 years:

Achieved 49%

higher than

target

Total investments by

2025 could be 21%

higher than target

Source: IRDA Source: IRDA, Credit Suisse estimates, * up to June 2012

Foreign investments make up 38% of total investments with Singapore emerging as the

largest investor. Investments from Singapore in the manufacturing sector have increased

since both the prime ministers from Malaysia and Singapore agreed on the Points of

Agreement (POA) settlement in May 2010, growing three-fold in 2011 versus 2010. We

expect investments from Singapore to pick up with the potential entry of Singapore

developers investing in Nusajaya.

Total committed

investments have reached

RM95.5 bn

Foreign investments make

up 38% of total investments

22 October 2012



Figure 9: 38% are foreign investments in Iskandar

Malaysia

Figure 10: Upward trend from Singapore investments in

the manufacturing sector

22.8 25.5 28.8 34.1 36.5

18.9

30.1

40.7

50.659.0

0

20

40

60

80

100

120

2008 2009 2010 2011 1H2012

RM

'bn

Foreign Local

0.2

0.80.7

2.0

6%

19%

34%* 34%*

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0.0

0.5

1.0

1.5

2.0

2.5

2010 2011 YTD Apr-12 YTD Apr-12(annualised)

RM

'bn

Investment from Singapore in manufacturing sector (RM'bn)

% of investment from Singapore to total manufacturing investments

FY2012E

(annualised)

+150%YoY

Source: IRDA Source: Company data, Credit Suisse estimates,* % calculated from

annualised investments

Nusajaya outperforms Klang Valley and Johor

We see evidence of robust demand in Nusajaya, given the high growth in residential

property prices (increased 67-90% since 2009), outperforming Klang Valley and Johor

(70% and 43%, respectively). Take-up rates for Imperia, Puteri Harbour and Impiana, East

Ledang have accelerated to 60-66% within four to five months of their launch compared to

one of UEM Land’s initial condominium launches in 2009—Ujana at East Ledang—which

achieved only a 23% take-up rate over a similar period. Today, average sales to foreigners

make up 50-60% of total sales, with the majority of buyers coming from Singapore and

Malaysians working in Singapore.

Figure 11: Semi-D prices in Nusajaya outperform those of

Klang Valley and Johor

Figure 12: Growth in terrace prices catches up with Klang

Valley’s

90.0

110.0

130.0

150.0

170.0

190.0

210.0

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

UEMLand: Semi-DSubang Jaya, Selangor: Semi-D (yearly numbers only)Bukit Bandaraya, KL: Semi-D (yearly numbers only)Johor: Semi-D

90.0

100.0

110.0

120.0

130.0

140.0

150.0

160.0

170.0

180.0

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

UEMLand: Terrace KL: Terrace

Johor: Terrace Selangor: Terrace

Source: The Edge, JLW Source: The Edge

Despite the high growth in property prices, the market value of properties in Singapore remains at three to six times higher than that of properties in Nusajaya. We believe there is further upside to property prices in Nusajaya should price trends converge towards Singapore housing price levels. We estimate that a 5% reduction in the pricing gap, while

Take-up rates accelerated

to 60-66% within 4-5 months

Singapore property prices

are 3-6x higher than

properties in Nusajaya

22 October 2012



keeping sales status quo, could potentially increase UEM Land’s three-year earnings CAGR by 10 p.p. to 15 p.p.

Figure 13: Property prices in Singapore are 3-6x higher than in Nusajaya (residential condominiums only)

Pricing gap

Singapore (Outer Central Region)

S$923/sq ft / RM2,304/sq ft 3.1x

Nusajaya (Puteri Harbour - harbourfront)

Singapore (Core Central Region) RM750/sq ft

S$1,685/sq ft / RM4,207/sq ft 5.6x

Source: URA, Company data, Credit Suisse estimates

Figure 14: Earnings growth potential from narrowing pricing gap

Narrowing of Pricing gap UEM Land SP Setia (Large cap) IJM Land (mid cap)

Compared to price gap by 3-yr earnings CAGR (%)

Singapore (OCR) Current 3.1x 21.3 15.1 20.3

Singapore (CCR) 5.6x 21.3

Singapore (OCR) 5% 2.7x 31.2






Source: Credit Suisse estimates

Launch of catalyst projects to draw more interest

The long-awaited catalyst projects such as Legoland, and education institutions, including

Marlborough College and Newcastle University of Medicine Malaysia, have finally opened

their doors. We expect more to come soon, thus, invigorating the township. These planned

catalyst projects strategically position Nusajaya as an inexpensive alternative to Singapore

and provide land to house core services such as education and healthcare, which

Singapore lacks. We expect the realisation of upcoming (already planned) projects and

new catalyst projects to draw greater interest and confidence in the development of

Nusajaya.

■ Affordable education

We believe there is a growing market for quality, reputable education, led by rising income

levels in the South East Asia region and growing expatriate families living in Singapore.

Educity, being the first of its kind in South East Asia, aims at tapping this underserved

market segment with affordable rates.

Marlborough College and Raffles American School offer British and American curriculum,

respectively, from pre-school to pre-university levels. Marlborough College began its first

term in August 2012, accepted 350 students, beyond its initial 250 target. The students

mostly hail from expatriate families from the US, Australia, Britain, Canada, Japan,

Thailand and Singapore. It aims to receive 13,050 students in the next five years. At the

moment, we understand that there is a long-waiting list to enroll in Marlborough College.

On the other hand, Raffles American School now operates on a temporary premises out of

five shops, waiting for the completion of its 46-acre permanent site in Nusajaya.

Educity also accommodates reputable universities, each offering their best faculty in

Iskandar Malaysia. Figure 15 shows the list of universities and the courses that it offers.

Educity is expected to house 12,000 to 16,000 students by 2018.

Catalyst projects have

opened and we expect more

to come

Overwhelming response

received by Marlborough

College

22 October 2012



Figure 15: Universities in Educity

Universities Faculty Opened/expected to be opened by

Newcastle University Medicine Malaysia Medicine 2011

University of Southampton Engineering Sep/Oct 2012

Netherlands Maritime Institute of Technology Maritime Transportation, Port & Shipping Courses December 2012

Raffles University Iskandar Design & Business 2013

University of Reading Malaysia Law & Business 2015

Source: Company data, Credit Suisse estimates

Figure 16: Marlborough College Figure 17: Newcastle University Medicine Malaysia

Source: Marlborough College Source: Newcastle University Medicine Malaysia

Figure 18: Students accommodation Figure 19: Sports complex

Source: Credit Suisse Source: Credit Suisse

22 October 2012



■ Cheaper healthcare

Recently-listed Integrated Healthcare Holdings (IHH) is building Gleneagles Medini

Hospital in Medini, Nusajaya, slated to be opened in 2015. The hospital will have a fully

integrated healthcare service platform with a 300-bed hospital, nursing home and a

rehabilitation centre. The establishment of these healthcare infrastructure facilities

presents itself as a compelling alternative to relatively high healthcare costs in Singapore.

Further, in 2010 the Singapore government allowed the use of MediSave from CPF for

Singapore residents to fund bills in ten hospitals owned by IHH, one of which is

Gleneagles Medini Hospital (when it opens) to encourage Singaporeans to seek cheaper

medical services outside the country and to reduce the burden on overcrowded public

hospitals in the country. Columbia Asia Hospital is the other hospital in Nusajaya,

operating in Afiat Healthpark with a capacity of 80 beds.

■ Inexpensive shopping

Singaporeans frequently cross the border to Johor for cheaper shopping, food and

entertainment, especially during weekends and public holidays. As such, shopping malls in

Nusajaya could position themselves as major complements to tourist attractions in

Iskandar. The Lifestyle Retail Mall in Medini, Nusajaya, is located at the entrance of the

Legoland Malaysia theme park. Phase 1 of the mall was opened on 22 September 2012,

in conjunction with the opening of Legoland. In the pipeline, UEM Land plans to build an

Asian Trade Centre or ‘China Mall,’ a wholesale market similar to the one in Guangzhou,

China.

Figure 20: Lifestyle Retail Mall of Medini Figure 21: Lifestyle Retail Mall of Medini

Source: Credit Suisse Source: Credit Suisse

■ Theme parks

Theme parks represent an excellent crowd-puller to Nusajaya and they have the multiplier

impact on the supporting businesses. Currently, there are two theme parks in Nusajaya—

Legoland and Puteri Harbour Family Theme Park.

Legoland Malaysia, the sixth Legoland in the world, which opened on 22 September 2012,

has sold 65,000 annual passes to-date. Since its opening, the number of visitors to Legoland

has been on average 3,000-4,000 on a weekday and 10,000-15,000 on weekends. It

expects to receive 1.2 mn visitors in the first year of operation. Legoland is constructing its

water park, expected to be opened in 2013, followed by Legoland Hotel in 2014.

Singaporeans can use

MediSave at Gleneagles

Medini Hospital

Legoland received 10,000-

15,000 visitors on weekends

22 October 2012



Figure 22: Legoland Malaysia at business close on a

weekday

Figure 23: Queue in one of the rides in Legoland on a

weekday

Source: Credit Suisse Source: Legoland Malaysia

Puteri Harbour Family Theme Park is an indoor hi-tech interactive theme park that

features famous characters such as Hello Kitty in Sanrio Hello Kitty Little Town, HIT

Entertainment characters like Bob the Builder, Barney, Angelina Ballerina, Pingu and

Thomas & Friends in The Little Big Club and The Kampung Boy Lat from a local comic.

The theme park is set to be opened in November 2012.

■ AutoCity

UEM Land plans to build an AutoCity in ‘Gerbang Nusajaya,’ a new phase of development,

to house various car showrooms. AutoCity will differentiate itself from other car

showrooms by having a test track. We understand that AutoCity is built to explicitly attract

Singaporeans who wish to own and drive luxury cars but do not have space to do so in

Singapore.

Figure 24: Summary of catalyst projects expected to commence operations soon

Catalyst developments Launch/opening

Puteri Harbour Family Theme Park Nov 2012

Legoland Water Park 2013

Pinewood Studios 2013

Legoland Hotel 2014

Gleneagles Medini Hospital 2015

China Mall 2014/2015

AutoCity 2014/2015


22 October 2012



Demand far exceeds supply We believe demand will be largely driven by two market segments—home seekers from

new jobs created in Nusajaya and migration of Singapore residents (including retirees)

who struggle with high cost of living. We estimate that the size of demand is 3x that of

supply, suggesting a sizeable market for Nusajaya.

Why these two market segments?

The Iskandar Regional Development Authority (IRDA) aims to attract RM382 bn worth of

investments into the region and forecasts new investments will create an additional

346,000 job vacancies by 2025. Is this achievable? IRDA had achieved committed

investments of RM95.5 bn as at June 2012, 39% above its target. The opening of

Legoland and Pinewood Studios is expected to generate 3,095 new jobs from 2012 to

2014. We believe corporations and manufacturers from Singapore will eventually take the

plunge primarily due to two reasons: (1) a lack of land in Singapore and (2) the

government is restricting the inflow of foreign workers into the country. We believe the

‘buy-in’ from Singapore corporations and manufacturers will pave way for more

investments in Nusajaya as an alternative to the former, including foreign investors looking

to establish a presence in the ASEAN region.

We view Nusajaya as an attractive alternative to the middle-income Singaporeans who

find it increasingly difficult to cope with the cost of living due to (1) high cost of amenities

and transportation, (2) high property prices and (3) recent tightening of immigration

policies and property cooling measures by the government. Consequently, Nusajaya’s

cheaper (by Singapore standards) premium living should appeal to this segment. We

believe that three segments of residents are most affected by rising costs and tightening of

government’s policies: (1) mid-income foreigners, (2) Malaysians living in Singapore and

(3) Singapore retirees.

Factors underpinning demand from Singapore

Scarcity of land in Singapore

Despite increased supply of the industrial space in Singapore, vacancy rates for the

industrial space are near all-time lows since 2004, suggesting robust demand for industrial

land. Prices have increased 27-28% on a three-year CAGR (2009-12) versus the 7-8%

(2002-12) on a ten-year CAGR. Land is scarce in the island state, and expansion of

factory and warehouse space is limited and costly.

Figure 25: Factory space supply vs. vacancy rate in

Singapore

Figure 26: Warehouse space is scarce to meet demand

0

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4

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14

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2Q

2012

Supply ('000 sqm) - LHS Vacancy Rate (%) - RHS

Source: URA Source: URA

Demand driven by new job

creation in Nusajaya and

migration of Singapore

residents struggling with

high cost of living

Land is limited and costly in

Singapore

22 October 2012



Figure 27: Upward trend in factory and warehouse prices (S$/sq ft) especially in the past

three years

50

100

150

200

250

300

2004

Q3

2004

Q4

2005

Q1

2005

Q2

2005

Q3

2005

Q4

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

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2007

Q2

2007

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2007

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2008

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2008

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2008

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2008

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2009

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2009

Q2

2009

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2009

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2010

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2010

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2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

Factory (All Types) Warehouse

Source: URA

Across the straits, Nusajaya could provide larger pieces of industrial land at a price which

is only one-sixteenth of the value in Singapore. Nusajaya has 191 acres of industrial land

remaining in Phase 3 of SilC and has assigned another 500 acres as industrial land in its

new development, Gerbang Nusajaya. We estimate that the new industrial area could be

divided into 354 plots, with 4,000 sq mt each (the size is 1.4-2.9x larger than industrial

plots in Tuas Techpark, Singapore).

Figure 28: Industrial land in Singapore is worth 16x more expensive than in Nusajaya

RM/sq ft Singapore Nusajaya Ratio

Industrial land 554 35 16x

Source: Company data, URA, The Edge, Credit Suisse estimates

Singapore ranks sixth most expensive city to live in the world vs. Malaysia at 102

Singapore is increasingly more expensive to live in. According to Mercer’s latest Cost of

Living Survey 2012, Singapore ranks as the sixth most expensive city to live in globally,

moving up two spots from 2011 (2010: 11th rank). It ranks third in Asia after Tokyo and

Osaka but ahead of Hong Kong (fourth). Kuala Lumpur (acting as a proxy to Johor) ranks

102nd

behind Jakarta (61st) and Bangkok (81

th).

22 October 2012



Figure 29: Singapore ranks the sixth-most expensive city to live in,

according to the Cost of Living Survey 2012 by Mercer

2012 2011 City Country

1 2 Tokyo Japan

2 1 Luanda Angola

3 6 Osaka Japan

4 4 Moscow Russia

5 5 Geneva Switzerland

6 7 Zurich Switzerland

6 8 Singapore Singapore

8 3 N’Djamena Chad

9 9 Hong Kong Hong Kong

10 11 Nagoya Japan

11 14 Sydney Australia

12 10 São Paulo Brazil

13 12 Rio de Janeiro Brazil

14 16 Bern Switzerland

15 21 Melbourne Australia

16 21 Shanghai China

17 20 Beijing China

18 15 Oslo Norway

19 30 Perth Australia

20 12 Libreville Gabon

102 104 Kuala Lumpur Malaysia


High housing prices in Singapore

Singapore property prices have risen 55% from the global financial crisis low. Despite

Singapore government’s five attempts to moderate rising property prices, they have

continued to rise. Our Singapore property analyst, Yvonne Voon, believes that prices will

continue to be on an upward trend due to building cost inflation and increased competition

for land bank. However, the government will impose more cooling measures to keep

prices relatively flat. Consequently, Singapore property buyers are looking at choices

outside Singapore, and Nusajaya represents a very good alternative given its geographical

proximity.

Figure 30: Singapore property prices continue to be on an upward trend despite five

rounds of cooling measures since September 2009

Source: URA, HDB, Credit Suisse

Upward trend in Singapore

housing prices

22 October 2012



We have simulated the affordability of housing for a household in Singapore versus in

Nusajaya and found that a typical household with a median monthly household income of

S$5,624 can only afford a 700 sq ft three-bedroom HDB flat in Singapore versus a 3,699

sq ft two-storey semi-detached landed property in Nusajaya. We believe the vast

difference in affordability is sufficient to offset an additional 20-30 minutes of extra travel

time for some residents.

Figure 31: Singapore median household income can afford to buy...

Median monthly household income S$5,624

Housing expenses 30% of monthly household income

Monthly installment S$1,687

Can afford to buy:

HDB flat in Singapore 1 unit of 700 sq ft 3-bedroom

1 unit of 970 sq ft 4-bedroom in OCR

Private condominium in Singapore 1 unit of 420 sq ft condominium in OCR (at the edge of Singapore)

Accomodation in Nusajaya 1 unit of 3,699 sq ft (built-up) 2-storey semi-D

2.2 units of 3000 sq ft (built up) 2-storey link house

1 unit of 1673 sq ft condominium in Puter Harbour

Source: Singstat, HDB, URA, Credit Suisse estimates

Singapore government tightening immigration laws

Singapore’s latest general election in May 2011, often described as a ‘watershed’ election,

saw the ruling party winning with the lowest share of votes since independence in 1965.

The relatively poor election result has put more pressure on the Singapore government to

address voters’ concerns such as high residential property prices and the influx of foreign

workers.

Since end-2011, the Singapore government has imposed various restrictive measures that

made living in Singapore harder for foreigners and permanent residents.

■ In the last round of cooling measures on properties in 7 December 2011, the

government imposed an additional 10% of buyer’s stamp duty for foreigners and 3%

for PRs buying a second and subsequent property.

■ In April 2012 the Singapore government abolished foreigners’ application for

permanent residence status via a minimum of S$10 mn deposit in Singapore.

■ Effective 1 September 2012, foreigners must earn at least S$4,000 (currently

S$2,800) a month to sponsor their spouses and children to live in Singapore, while

certain categories of foreign workers will no longer be permitted to bring parents and

in-laws into Singapore on long-term visit passes. New rules will apply to foreign

workers who switch jobs after 1 September 2012.

■ From 2012 onwards, Singapore citizens will be given absolute priority over PRs when

balloting for specific schools when applications exceed vacancies.

Further, Singapore newspapers reported that the government is contemplating an

increase of school fees for permanent residents’ children.

Singapore government restricting inflow of foreign workers

The government, in its attempt to manage immigration, has announced a 5% reduction in

Dependency Ratio Ceilings (DRCs) (maximum proportion of foreign workers allowed) for both

the manufacturing and services sectors (new DRC of 60% and 45%, respectively), effective 1

July 2012 during the announcement of Singapore’s Budget 2012 in February 2012.

Companies that exceed the new DRCs with their existing foreign workforce will be given a

grace period of two years (until June 2014) to comply with the new DRCs. It was reported that

some 500 manufacturing companies and 8,500 service companies would be affected.

Median monthly household

income in Singapore can

afford a 700 sq ft HDB flat

vs a semi-detached land

property in Nusajaya

Singapore government

under pressure to tighten

immigration laws

Singapore government

restricting foreign workers

versus incentives in

Nusajaya

22 October 2012



With the tightened inflow of foreign workers into Singapore, companies with high

dependency on foreign workers could potentially look to Nusajaya for a solution.

We list below some of the perks that Iskandar Regional Development Authority (IRDA) is

offering to companies operating in approved areas of the region:

■ Exemption from the Foreign Investment Committee (FIC) rules (in relation to purchase

of properties)

■ Unrestricted employment of foreign knowledge workers

■ Tax incentives:

o Exemption from corporate income tax for ten years

o Exemption from withholding tax on payment of royalty and services fee to non-

residents for ten years

■ 30% bumiputera equity not required

Additionally, knowledge workers in Iskandar enjoy a flat tax rate of 15%, lower than top

marginal personal tax rate of 25% in Malaysia and 20% in Singapore. The lower tax rate

bodes well to encourage employees to relocate.

Upward trend of MYRSGD exchange rates and a low interest rate environment

Although the Malaysian government imposed some tightening measures on speculative

buying, the environment remained conducive for the property market given low lending

rates and favourable exchange rates for Singaporeans. Average lending rates are at their

lowest since the Asian financial crisis. The long-term upward trend in MYRSGD exchange

rates bodes well for Singaporeans as they stand to have a two-pronged gain on property

investment—capital and exchange rates gains.

Figure 32: Long-term upward trend in MYRSGD exchange

rate

Figure 33: Malaysian banks’ average lending rates at their

lowest

2.00

2.10

2.20

2.30

2.40

2.50

2.60

Jan-

01

Jun-

01

Nov

-01

Apr

-02

Sep

-02

Feb

-03

Jul-0

3

Dec

-03

May

-04

Oct

-04

Mar

-05

Aug

-05

Jan-

06

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb

-08

Jul-0

8

Dec

-08

May

-09

Oct

-09

Mar

-10

Aug

-10

Jan-

11

Jun-

11

Nov

-11

Apr

-12

Sep

-12

RM

/ S

GD

1

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

31/0

1/19

97

31/0

1/19

98

31/0

1/19

99

31/0

1/20

00

31/0

1/20

01

31/0

1/20

02

31/0

1/20

03

31/0

1/20

04

31/0

1/20

05

31/0

1/20

06

31/0

1/20

07

31/0

1/20

08

31/0

1/20

09

31/0

1/20

10

31/0

1/20

11

31/0

1/20

12

Source: Bloomberg Source: BNM

22 October 2012



Size of estimated demand versus supply

Size of the different market segments

■ Job creation from new investments in Nusajaya

The Iskandar Regional Development Authority (IRDA) forecasts new investments will

create an additional 346,000 job vacancies by 2025 of which 69% or 240,000 job

vacancies are from key economic activities earmarked for Nusajaya.

Figure 34: IRDA's forecast of job vacancies by 2025

89,363

61,168

46,655

38,715

30,450 28,771

19,786 15,876 15,237

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Ele

ctric

al &

ele

ctro

nics

Fin

anci

al c

onsu

lting

Logi

stic

s

Edu

catio

n

Hea

lthca

re

Foo

d &

agr

o pr

oces

sing

Tou

rism

Pet

roch

em &

Ole

oche

m

Cre

ativ

e in

dust

ries

Source: IRDA

■ Foreign labour force

36% of Singapore’s labour force are non-residents and this figure is growing at a 5.4%

ten-year CAGR (vs. 2.4% for residents). Non-residents grew by 6.3%YoY in 2011. As at

2011, there were approximately 1 mn foreign workers (excluding foreign domestic helpers)

in Singapore.

Figure 35: 36% of Singapore’s labour force are non-residents (2011)

Residents64%

Non-residents36%

Source: Ministry of Manpower, Singstat

IRDA targets to create

346,000 new jobs by 2025

36% of Singapore’s labour

force are non-residents

22 October 2012



■ Malaysian citizens working and residing in Singapore

World Bank published a report in 2011 on Malaysia’s brain drain issue and estimates that

the Malaysian diaspora were 1 mn in 2010, of which 33% are from brain drain. Singapore

alone absorbs 57% of the Malaysian diaspora and 54% of the brain drain. Skilled diaspora

is growing at an average of 6% p.a.

Figure 36: Singapore gets the bulk of Malaysian diaspora Figure 37: Growth in brain drain, annual 2000-10

4

2

5

10

3

15

54

2

2

6

6

7

10

57

0 10 20 30 40 50 60

Canada

New Zealand

United Kingdom

United States

Brunei

Australia

Singapore

%

Diaspora in 2010 Brain drain in 2010

0.5

2.6

2.9

3.5

4.7

4.7

6.2

0 1 2 3 4 5 6 7

Canada

United Kingdom

Australia

United States

New Zealand

Brunei

Singapore

Average: 4.2%

Source: World Bank Source: World Bank

■ Retirees in Singapore

The Singapore’s population is ageing. The >60 age group recorded the highest growth at

5.8% in 2011 while the 0-24 age group shrunk -1.1% in 2011. The ratio of working

population (aged 25-59) to old age population (age >60) dropped from 5 in 2001 to 3.7 in

2011.

Figure 38: Singapore residents aged >60 growing at 4.5%

ten-year CAGR

Figure 39: Highest growth rates for age group >60

362 413

441 469

500 530

561

-

100

200

300

400

500

600

2001 2006 2007 2008 2009 2010 2011

'000

10-yr CAGR = 4.5%

0.0 0.2 0.5

1.1

-0.6-1.1

1.6

1.4 1.3

2.4

0.7 0.0

2.7

6.9 6.3 6.66.1

5.8

1.2

1.6 1.7

2.5

1.0

0.5

-2.0

0.0

2.0

4.0

6.0

8.0

2006 2007 2008 2009 2010 2011

0-24 25-59 >60 Total

Source: Singstats Source: Singstats

Scenario analysis on estimated demand and supply by 2025

We estimate that total demand is three times total supply by 2025 suggesting potential

upside to property prices if supply is released gradually will match the growth in demand.

Our base case is based on the following assumptions:

~400,000 Malaysians in

Singapore

Singapore is an ageing

population

Demand is three times of

supply by 2025

22 October 2012



Assumptions for demand:

54% of the new job creation will be in Nusajaya, from which we took half the number

of skilled workers estimated at 48%.

10% of foreign workers in Singapore will migrate to Nusajaya

20% of Malaysians living in Singapore will migrate to Nusajaya, from which we have

halved the amount assuming an average household size of two adults

5% of Singapore retirees will migrate to Nusajaya

Assumptions for supply:

Land efficiency of 70%

60% of land earmarked for residential properties

Density of 15 housing units per acre over remaining land for development

Figure 41 displays the different sizes of what demand could be versus supply if the base

case assumptions for demand were adjusted by -5 p.p to +15 p.p while keeping our

assumptions for supply unchanged. For example, a -5 p.p. adjustment reduces the

assumption of foreign workers in Singapore migrating to Nusajaya from 10% to 5%. The

reduction will be applied across the board. We found that demand is still greater than

supply at one notch below our base case (a 5 p.p reduction in our base case) but the

potential upside far exceeds supply.

Figure 40: Base case: Estimated demand could potentially

exceed supply by three-fold by 2025

Figure 41: Scenario analysis on estimated demand vs.

base case supply by 2025

8%

54%

24%

14%

0%

20%

40%

60%

80%

100%

120%

Demand Supply

Job Creation Singapore foreigners

Malaysians Retirees

33% of Demand

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

-5% Base case +5% +10% +15% Supply

Job creation Singapore foreigners Malaysians Retirees

1.4x of supply

3.1x

4.7x

6.4x

8.0x

Source: Credit Suisse estimates Source: Credit Suisse estimates

Figure 42 shows a matrix of estimated demand versus supply in Nusajaya with different

assumptions of demand and supply, i.e. changing base case demand assumptions by -5

p.p to 15 p.p while imposing different levels of density assumptions to estimate supply.

Demand falls below supply only in two instances out of 25 possibilities.

Figure 42: Matrix of estimated demand and supply by 2025

Demand = x times of supply

Demand (% change to base case assumptions) -5% Base case +5% +10% +15%

Supply (density of units per acre)

10 2.1x 4.6x 7.1x 9.5x 12.0x

Base case = 15 1.4x 3.1x 4.7x 6.4x 8.0x

20 1.1x 2.3x 3.5x 4.8x 6.0x

25 0.9x 1.8x 2.8x 3.8x 4.8x

30 0.7x 1.5x 2.4x 3.2x 4.0x

Source: Credit Suisse estimates

22 October 2012



Good risk-reward proposition UEM Land offers attractive reward versus risk when we measure with the R-cubed ratio

based on P/BV (R-cubed ratio = 1.6-to-1 on P/BV). We have used the following to

calculate the R-cubed ratio.

■ Downside risk: This is measured based on the percentage decline in price to ‘trough’

P/BV (global financial crisis (GFC) low).

■ Upside risk: Potential upside to our target price.

■ Reward versus risk: This is measured by the ratio of potential upside to potential

downside.

Figure 43: R-cubed ratio breakdown

P/BV RM / share

Current 1.59 1.85

Trough (GFC low) 1.04 1.23

Target Price 2.40 2.85

Upside 54%

Downside -34%

R3 1.60

Source: Thomson Analytics, Credit Suisse estimates

Potential catalyst

The key catalysts for UEM Land that could potentially cause a re-rating of the stock:

Potential entry of Singapore developers

Management is in talks with Singapore developers to undertake some developments in

Nusajaya jointly and expects to announce a partnership by year-end. We understand the

reputable Singaporean industrial developer is likely to be Ascendas to develop a 500-acre

industrial land in ‘Gerbang Nusajaya’ – Nusajaya Phase 2.

In 2Q12, UEM Land booked a conditional sale of eight acres in Puteri Harbour for RM93

mn to a foreign developer. The identity of the foreign developer has not been announced

but we expect response from Singapore would be good if the foreign party is a reputable

Singapore developer as we have seen from the launch of Sommerset Service Apartments

in Puteri Harbour, managed by Ascott (a Singapore developer), which was snapped up

(mostly by Singaporeans) at record time.

We expect the potential entry of Singapore developers, the likes of Capitaland, CDL Land,

Mapletree, Keppel Land, could further underpin confidence of Singapore buyers and

continue to drive demand northwards.

Confirmation of Rapid Transit System between Singapore and Johor

Phase 1 of the feasibility study is expected to be completed by year-end. We expect the

execution plan of the Rapid Transit System (RTS) to be announced by 2013. Nusajaya

and Singapore would be truly borderless with the completion of RTS in 2018 coupled with

the implementation of a single co-located CIQ facility.

Easier immigration process at the border

The full implementation of Malaysian Automated Clearance System (MACS) to Singapore

citizens and residents will ease human traffic at the immigration, thus reducing travel time

between Malaysia and Singapore. The Joint Meeting Committee (JMC) is undertaking a

feasibility study to have a single co-located CIQ facility. These positive efforts could

eventually lead to Malaysia and Singapore being ‘borderless’ like in Europe.

Big potential upside, limited

downside

Singapore property

developers investing in

Nusajaya

RTS to link Singapore and

Johor

Easier immigration process

reduces hassle and

shortens travel time

22 October 2012



Success of newly opened catalyst projects and unveiling of new ones

The opening of catalyst projects in Nusajaya has been well received with the excitement

by general public in Malaysia and Singapore. More will be convinced when these projects

prove to remain successful even after a period of novelty.

Management expects to unveil more of its plans for ‘Gerbang Nusajaya’ and upcoming

catalyst projects in 2013. We expect the roll-out of Phase 2 catalyst projects and

announcement of potential partnerships with foreign investors on Autocity and China Mall

to be positive for UEM Land.

Limited downside risks

Street earnings expectations are already low and not difficult to beat

Street consensus for FY12 net profit of RM356 mn is 16% below UEM Land’s FY12 KPI

target of RM422 mn. 1H12 net profit of RM162 mn was 46% of street’s full-year estimates.

We believe the market has priced in the possibility of underperformance in FY12 earnings.

Any positive indication to earnings growth in 2H12 could potentially result in an upward re-

rating for the stock.

Low foreign ownership

UEM Land is under-owned by foreign investors at 15%, below the average foreign

ownership of 23% in the Malaysia market. Currently, SP Setia’s foreign ownership is only

a few notches above UEM Land. However, at its peak in 2006, foreign investors had a

56% stake in SP Setia and achieved the best share price performance (increased by 56%)

since year 2000. We attribute the low foreign shareholdings to skeptics who have yet to

appreciate the full potential of Nusajaya, the benefits of warmer Malaysia-Singapore ties

and a lack of foreign broker coverage. We expect to see a pick-up in foreign interest as

Nusajaya begins to gain traction.

Figure 44: Foreign shareholdings

52

42 41

37 35

33 30

28 27 27 23 23

21 21 19 18 18 18 17 16 16 15

13 13 12 12

-

10

20

30

40

50

60

Air

Asi

a

Gen

ting

IJM

Gen

ting

M's

ia

CIM

B

Alli

ance

Gam

uda

Pub

lic B

k

BA

T

Axi

ata

YT

L

Mar

ket

Sun

RE

IT

Tel

ekom KLK

BJT

OT

O

SP

Set

ia IOI

Sim

e

Bur

sa

May

bank

UE

M L

and

Tan

Cho

ng

DiG

i

Pos

M's

ia

Max

is

Source: Company data

Under-researched

UEM Land is covered by 16 analysts of which only five are from foreign brokerages

compared with 23 analysts covering SP Setia with nine foreign brokerages. We expect

broker coverage to pick up once we see current government and private proposals in

Nusajaya being implemented.

Phase 2-‘Gerbang

Nusajaya’ targets to attract

Singaporeans

Street consensus is 16%

below UEM Land’s FY12

KPI target of RM422 mn

Under-researched stock

with only 16 analysts

covering versus 23 covering

local peers

22 October 2012



Negatives known and priced in

■ Datuk Dr Tong Kooi Ong’s departure

We believe one of the major factors weighing down the stock is the imminence of Datuk

Tong Kooi Ong’s departure when the RCPS expires on 4 January 2013. The departure of

Datuk Tong would seem to impact UEM Land negatively as it would mean a loss of

expertise and knowledge as well as possible exodus by ex-Sunrise employees currently

with UEM Land. However, with the share price trading at a 14% discount to RCPS’

conversion price of RM2.30, we believe this uncertainty has been priced into the stock.

The market is worried that Datuk Tong’s departure might jeopardise the execution of the

developments in Nusajaya. However, demand in Nusajaya, as we have shown above, is

mainly driven by macro factors and changes in both Malaysia and Singapore government

policies, which are mainly G-to-G driven.

Moreover, in a short span of two years, Datuk Tong has contributed to the planning and

strategy of UEM Land’s development in Nusajaya, especially in the Phase 2 master plan

‘Gerbang Nusajaya’, possibly the final phase of Nusajaya’s development. Even with his

departure, Datuk Tong will leave his ‘footprint’ behind and we expect UEM Land to remain

faithful to Datuk Tong’s contribution and vision. As such, UEM Land stands to inherit a

good, if not excellent, plan but will have to execute it accordingly.

In our opinion, Khazanah, UEM Land’s major shareholder via UEM Group, plays an even

bigger role in ensuring the realisation of Nusajaya. Iskandar Malaysia is an initiative hand-

picked by Malaysian government and spear-headed by the Malaysia government’s

investment arm, Khazanah Nasional Berhad (Khazanah).

Khazanah manages RM45.5 bn worth of assets as at December 2011 and the property

sector is its third largest portfolio, constituting 14% of its total assets. One of its largest

property assets is the 2,231-acre Medini Iskandar. The development has an estimated

gross development value of US$20 bn over 15-20 years.

Further, Khazanah owns a 65% stake in UEM Land, which constitutes 7% of total market

capital of Khazanah’s holdings in listed companies. Including UEM Land’s land bank in

Nusajaya, Khazanah owns close to 11,000 acres worth of land in Nusajaya.

Given the high stakes in terms of reputation and investment risk, we believe the Malaysian

government and Khazanah have vested interest to ensure that Nusajaya is a success.

Being a sovereign entity, Khazanah has direct access to G-to-G negotiations for economic

collaboration or investments between Nusajaya and Singapore, therefore impacting

demand in Nusajaya directly. We view Nusajaya as ‘too big to fail’ for Khazanah and as

such, Khazanah will put its weight behind UEM Land.

Figure 45: Khazanah's Investment Portfolio as at 29 April

2012

Figure 46: Khazanah’s investments in listed companies –

owns a 65% stake in UEM Land, 7% by market value

Media & Comms

23%

Financial19%

Property14%

Others12%

Utilities11%

Infrastructure & Construction

9%

Healthcare5%

Transportation & Logistics

5%

Automotive1%

Leisure & Tourism

1% Agriculture0%

Source: Khazanah Annual Review 2012 Source: Bloomberg

Datuk Tong has contributed

the master plan of ‘Gerbang

Nusajaya’… UEM Land to

execute accordingly

Khazanah will take on a

parenting role as the project

is deemed ‘too big to fail’

22 October 2012



■ Potential large cash outlay due to the redemption of RCPS in January 2013

The Redeemable Convertible Preference Shares (RCPS), which was issued in 2010 to

acquire Sunrise, will be expiring on 7 January 2013. There is approximately RM400 mn

worth of unconverted RCPS. This raises cash flow concerns—whether UEM Land would

struggle with a substantial cash outlay if a large amount of RCPS holders redeem now that

the share price is substantially below the conversion price of RM2.30.

We understand that management is looking to raise financing of up to RM2 bn. Proceeds

from the loan will be used partly to finance cash redemption of RCPS, partly to refinance

existing loans with high interest rates and the remaining (estimated to be RM1.0-1.5 bn)

will be used to finance new projects. The full drawdown of the loan could potentially raise

the gearing ratio to 0.31-0.43x from the current 0.15x as at June 2012 (vs. the industry

average of 0.21x).

■ Uncertainties surrounding Malaysia’s general elections

The increase in opposition party’s popularity among voters in recent years and Prime

Minister’s hesitation to call for the next general election due in March 2013 has dampened

the price performance of most government-linked companies, such as UEM Land, as

investors take a ‘wait and see’ approach. The market’s view is that the ruling party,

Barisan Nasional, will remain in power but with a weaker mandate. Johor, being one of

Barisan Nasional’s strongholds, poses less political risk relative to other states. As such,

we see the overhang in share price as a good entry point for potential upside when the

uncertainty of the general elections is finally settled. In any case, we believe that the

opposition party is also supportive of stronger ties with Singapore. Hence, there should not

be any election overhang on UEM Land.

■ Lack of visibility of potential FDIs in Nusajaya

We have seen the realisation of earlier committed foreign investments such as Legoland,

foreign education institutions. However, we lack visibility on new mega FDIs in Nusajaya

that could drive demand in the area. We expect investments from Singapore, such as the

rollout of Khazanah-Temasek’s Wellness Project and private investments from Singapore

to be the next major catalysts.

RCPS expiring on 7 January

2013; refinancing may raise

gearing

Overhang from general

election uncertainties but we

believe little political risk

22 October 2012



Valuation Using the RNAV model, we derive a target price of RM2.85 by applying a 20% discount to

RNAV due to the long gestation period for a large tract of land bank in a relatively new

area, and our cautious outlook on the overall property market and uncertainties in the

management team after the expiry of RCPS. Target price of RM2.85 implies 56% potential

upside and a gross land price of RM50/sq ft.

Our RNAV model is based on:

Estimating NPV of the profits for ongoing projects, and

Assigning specific valuation for the undeveloped land bank based on land usage

zoning and relevant transacted prices within the vicinity and management guidance.

Figure 47: Summary of UEM Land's RNAV

Value (RM mn)

Net surplus from land bank 8,000.9

UEM Land's NAV 4,836.4

NBV of ongoing projects 2,937.1

RNAV 16,722.4

RNAV / share 3.56

Target price @ 20% discount 2.85

Average gross land price / sq ft (RM) 50

Source: Credit Suisse estimates, Company data

Impact of RCPS conversion on RNAV/share

We analyse below the impact of RCPS when it expires on 4 January 2013 on the RNAV /

share below. RCPS holders have three options to choose from by December 2012:

Cash option: Redeem the RCPS with a cash of RM1 for each RCPS

Convert to shares (default option if RCPS holders do not make a selection): Convert

the RCPS to UEM Land’s shares at a conversion price of RM2.30

Convert + cash: Convert one RCPS with additional cash of RM1.30 for one UEM Land

share

Figure 48: Impact of RCPS on RNAV / share when it expires

RNAV / share (RM) TP @ 20% discount

Impact of RCPS when it expires to RNAV / share:

Option 1: RCPS fully redeemed with cash 3.56 2.85

Option 2: RCPS fully converted to shares 3.53 2.82

Option 3: RCPS fully converted to shares with additional cash 3.60 2.88

Source: Credit Suisse estimates, Company data

Sensitivity analysis of UEM Land’s RNAV

Given undeveloped land bank constituting half of RNAV calculation, we calculate the

sensitivity of UEM Land’s RNAV per share to land price changes. The table below shows a

1% change in land prices translates into a 0.6% change in RNAV per share or a RM1

change in land prices translates into a 1.2% change in RNAV per share. Property prices in

Nusajaya have been growing at an average of 19-24% p.a. If we assume the same level of

growth on land prices, the share price could potentially grow to RM3.97-4.07, which is

twice the current share price.

Target price of RM2.85 with

potential upside of 56%,

implied gross land price of

RM50/sq ft

RM1 increase in land prices

translates to a 1.2% change

in RNAV per share

22 October 2012



Figure 49: Sensitivity analysis of RNAV per share with different land prices

-40% -30% -20% -10% Current +10% +20% +30% +40%

Gross psf value (RM) 30 35 40 45 50 55 60 65 70

Value of landbank (RM'mn) 7,408 8,643 9,878 11,112 12,396 13,582 14,816 16,051 17,286

Net surplus from landbank (RM'mn) 4,260 5,186 6,112 7,038 8,001 8,890 9,816 10,742 11,668

RNAV (RM'mn) 11,633 12,559 13,485 14,411 15,374 16,263 17,189 18,115 19,042

RNAV per share (RM) 2.69 2.90 3.12 3.33 3.56 3.76 3.98 4.19 4.40

% change -24.3 -18.3 -12.3 -6.3 0.0 5.8 11.8 17.8 23.9


Figure 50: Selected major land transactions in Nusajaya

Seller Year Price (RM mn) Acreage Price/sq ft (RM)

SiLC (Industrial Land)

Average price transacted for 2007 UEM Land 2007 20.5





Commercial

AEON SP Setia 2007 107.0 37.8 65.0

Puteri Harbour (Waterfront commercial & residential)

Limitless Holdings PTE LTD UEM Land 2008 241.8 111.0 50.0

Themed Attractions and Resorts UEM Land 2009 26.7 4.2 145.0

UM Land UEM Land 2010 67.8 9.2 170.0

Encorp Berhad UEM Land 2010 25.9 3.3 180.0

Tiong Nam UEM Land 2011 220.0

Foreign Developer UEM Land 2012 93.0 7.8 275.0

Mix

Khazanah Nasional UEM Land 2007 1430.3 4500.0 7.3

Middle East Consortium Khazanah 2007 4100.0 2230.0 42.2

Nuri Merdu (Khazanah-Temasek JV) Khazanah 2011 350.0 210 38.3

Semarah Cahaya (Khazanah-Sunway JV) Global Capital & Dev 2011 745.0 692 24.7

Zhouda Real Estate Group Khazanah 2011 157.6 17.9 201.8

70.8 9.6 168.8


22 October 2012



Trading well below historical levels

UEM Land’s share price currently trades at a 47% discount to RNAV, just slightly lower

than 1 standard deviation below the historical average. The market-implied land price at

RM11/sq ft is close to the land prices transacted in 2007 which is way below current

transacted land prices in Nusajaya.

Figure 51: P/RNAV at 1 standard deviation below the

historical average

Figure 52: Market-implied land price at a historical low,

close to land prices transacted in 2007

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Dec

08

Mar

09

Jun

09

Sep

09

Dec

09

Mar

10

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Average = 0.68x

0.47x- 1 Std Dev = 0.50x

+ 1 Std Dev = 0.85x

0

10

20

30

40

50

60

Jul 1

0

Sep

10

Nov

10

Jan

11

Mar

11

May

11

Jul 1

1

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul 1

2

Sep

12

RM11

Source: Credit Suisse estimates, Thomson Analytics Source: Credit Suisse estimates

Trading at P/E and P/B levels close to IPO

UEM Land trades at one-year forward P/E of 17.2x, at one standard deviation below the

historical mean. Current P/E has fallen 51% from the historical high. Trailing P/BV at 1.6x

is lower than one standard deviation below the historical average and below local peers’

average of 1.7x. Current P/E and P/BV levels are close to the levels when UEM Land was

first listed at RM0.50/share in November 2008, which we believe is a good entry point now

that current developments are moving in favour for Nusajaya.

Figure 53: P/E at 1 standard deviation below the historical

mean

Figure 54: PB below 1 standard deviation below the

historical mean

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Dec

08

Mar

09

Jun

09

Sep

09

Dec

09

Mar

10

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Average = 23.4x 17.2x

+1 Std Dev = 29.5x

- 1 Std Dev = 17.3x

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Dec

08

Mar

09

Jun

09

Sep

09

Dec

09

Mar

10

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Average = 2.4x 1.6x

+1 Std Dev = 3.1x

-1 Std Dev = 1.7x

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Market-implied land price at

RM11, an 80% discount

from land value

Trades on P/E of 17.2x, at 1

standard deviation below

the historical mean

Trades on P/BV of 1.6x

below local peers of 1.7x

22 October 2012



What has changed?

The Nusajaya story has been told several times since its inception and investors had been

disappointed in the past with the lack of ‘ingredients’ to draw interests in Nusajaya and

mostly wondered whether it would remain just a story. However, a lot has changed over

the past two to three years and we believe the progress will only pick up from here.

Figure 55: What has changed...

Then (3-4 years ago) Now

1) Malaysia-Singapore G-to-G relationship

- “love-hate” relationship - Improved bilateral relationships since May 2010 Leaders Retreat

- unresolved legacy issues which is often the main - Three major legacy issues finally resolved

cause of "squabbles" between the two countries Pedra Branca territorial dispute

Water issue

Railway land dispute

- Khazanah and Temasek JV to develop land in Singapore and Nusajaya

- Point of Agreement (POA) between Malaysia and Singapore progressing well

(refer to Figure 57)

2) Demand from Singapore

- little or no interests from Singapore - About 50% property buyers are foreigners, majority from Singapore

3) Catalyst projects

- no catalyst projects - Catalyst project started operations with more to come

Educity - Marlborough College, The University of Southampton, Newcastle

University Medicine Malaysia and etc

Theme parks such as Legoland and Puteri Harbour Family Indoor Theme

Park

Pinewood Studios

Hospitals - Gleneagles Hospital and Colombia Asia Hospital

Shopping - Mall of Medini, China Mall

AutoCity

4) Infrastructure

- no infrastructure - The Coastal Highway reducing travel time from Nusajaya to Johor Bahru to 20

minutes from 40-45 minutes

- Rapid Transit System (RTS) link between Johor Bahru and Singapore

- Ferry Terminal and CIQ at Puteri Harbour (early 2013)

- Reduction of toll rates by 30% at the Second Link Highway (to Singapore)

- Public bus service which stops at Puteri Harbour

5) Government incentives to encourage investments in Iskandar Malaysia

- no government incentives - 15% tax rate for knowledge workers in Iskandar Malaysia

- Flagship Incentives Iskandar Malaysia (FIM) - tax incentives for selected sectors

- Incentives to companies operating in approved areas of Iskandar region

Source: IRDA, Credit Suisse, news articles, Company data

22 October 2012



Figure 56: Progress on Joint Statement from Singapore-Malaysia Leaders’ Retreat of 24 May 2010

Collaborations/Initiatives Progress Achievement

Cross-border scheduled bus services to double with

introduction of eight new additional routes (four from each

side)

Five new cross-border bus services have been implemented

since September 2010 (including routes to Changi Airport and

RWS)

Ongoing

Liberalisation of cross border taxi services being allowed to

pick up and drop of passengers from any location on the

domestic leg

Implemented effective June 2012 Achieved

Implementation of Malaysian Automated Clearance System

(MACS) to facilitate cross-border immigration clearance for

frequent travellers between the two countries

Implemented in 2009 to Singaporeans only

Effective 22 January 2011, MACS is open for all Singaporeans,

Singapore PRs and holders of long term visit pass and removed

"regular JB visitor" condition for applicants. Also, MACS users do

not need to submit the white card upon entry to Malaysia

No. of users improved to 167,083 as at April 2012 from 1,120 in

2009

Achieved

Toll charges for the Second Link will be significantly reduced

at both Singapore (Tuas Checkpoint) and Malaysia

(Linkedua) custom/toll booths

Toll charges were reduced by 30% effective 1 August 2010.

Traffic has increased by 10% since reduction of toll rates

Achieved

KTMB station will be relocated from Tanjong Pagar to the

Woodlands Train Checkpoint (WTCP) by 1 July 2011

KTMB station was closed down on 1 July 2011 Achieved

M+S Pte Ltd (60:40 Khazanah-Temasek JV) to develop four

parcels of land in Marina South and two parcels of land in

Ophir-Rochor, following the KTM land swap

M+S submitted designs for both developments for planning

approvals during Joint Meeting Committee (JMC) held in January

2012.

A ground-breaking ceremony of Marina One (Marina South) was

held on 11 July 2012. M+S targets to launch in September an

integrated commerce, retail and premium residential space with

GDV of S$7 bn (GFA of 341k sq m), to be completed by 2017.

UEM Land and Mapletree have been appointed as project

managers.

Ongoing

Rapid Transit System (RTS) link between Tanjung Puteri,

Johor Bahru and Singapore will be jointly developed. The

rapid transit system link will be integrated with public

transport services in both Johor Bahru and Singapore.

Targets to be operational by 2018.

Currently in Phase 1, undergoing architectural and engineering

consultancy study by consortium of AECOM Singapore, AECOM

Perunding and SA Architects expected to complete by end-2012.

Among the suggestions to be studied include an undersea tunnel

for vehicles only or for both rail and vehicles.

Ongoing

RTS will have a single co-located CIQ facility in Singapore

with the exact location to be detemined later.

Undergoing feasibility study Ongoing

Pulau Indah Ventures (50:50 Khazanah-Temasek JV)

company to undertake the development of the iconic

wellness township in Iskandar Malaysia - five-acre "Urban

Wellness" in Medini North and the 210-acre "Resort

Wellness" development in Medini Central

Models and concept plans for the Urban Wellness and Resort

Wellness were unveiled to both Prime Ministers of Malaysia and

Singapore during JMC held in January 2012 with an estimated

GDV of RM3 bn.

Capitaland and E&O have been appointed as project managers

for Urban Wellness and Resort Wellness respectively.

Construction is scheduled to begin in 2013 for four to five years.

Ongoing

Source: Company data, Credit Suisse estimates, news announcements

22 October 2012



Key risks In our view, the key risks for UEM Land that could derail our investment case are:

■ Management and execution risk – As a new developer, UEM Land acquired a well-

established property developer, Sunrise, in 2010 for its brand name and experience. It

has been almost two years since the acquisition and we have seen encouraging

influence spillover from Sunrise’s expertise in UEM Land’s plans and execution. After

the merger, key personnel from Sunrise were very quickly appointed as key operating

officers in UEM Land managing most of the major projects in the company. With Datuk

Tong leaving, RCPS expiring and the overdependence on ex-Sunrise staff, any loss of

ex-Sunrise key personnel will be a major setback for UEM Land. This could potentially

lead to increased execution risk of upcoming planned developments, which is still

crucial to garner investor confidence in Nusajaya.

■ Malaysia-Singapore relations – The success of Iskandar Malaysia hinges on the

warming relationship between Malaysia and Singapore leading to better connectivity

and economic collaborations between the two countries. Any risk to this new improved

relationship could negatively impact the development of Iskandar. However, from the

progress of the partnership, we believe the risk is minimal.

■ Global recession – A large-scale development such as UEM Land requires a lot of

foreign investments. In the event of a global recession, expansion and investment

decisions might be put on hold, thus delaying much needed investments into

Nusajaya.

■ At risk to be removed from FBM KLCI – UEM Land is now the only property

company in FBM KLCI. However, with the recent success of a few mega IPOs in

Malaysia and potential IPOs, UEM Land is now at risk to be removed from FBM KLCI.

Based on Credit Suisse’s estimates, the two possible companies to make way for the

inclusion of Felda Global Ventures (FGVH) and other large IPOs, would be Malaysia

Marine and Heavy Engineering (MMHE) and UEM Land.

Increased execution risks if

key ex-Sunrise staff leave

Malaysia-Singapore

relations is crucial

Pro-longed global recession

slows down investment

plans

UEM Land at risk to be

removed from FBM KLCI

22 October 2012



Companies Mentioned (Price as of 19 Oct 12)

Capitaland (CATL.SI, S$3.27, OUTPERFORM, TP S$3.70) City Developments (CTDM.SI, S$11.78, OUTPERFORM, TP S$13.39) IJM Land Berhad (IJML.KL, RM2.13, NEUTRAL, TP RM2.30) Keppel Land (KLAN.SI, S$3.44, NEUTRAL, TP S$3.72) Mapletree Logistics Trust (MAPL.SI, S$1.16, OUTPERFORM, TP S$1.30) SP Setia (SETI.KL, RM3.60, NEUTRAL, TP RM3.60) UEM Land Holdings Bhd (ULHB.KL, RM1.83, OUTPERFORM, TP RM2.85)

Disclosure Appendix Important Global Disclosures

I, Danny Goh, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

See the Companies Mentioned section for full company names.

3-Year Price, Target Price and Rating Change History Chart for ULHB.KL

ULHB.KL Closing

Price

Target

Price

Initiation/

Date (RM) (RM) Rating Assumption

09-Jul-10 1.52 2 O X

27-Sep-10 2.02 2.6

12-Nov-10 2.37 3.6

11-Jan-11 3.04 3.7

28-Feb-11 2.7 3.8

04-Jun-12 X

2

3

44

4

09-Jul-10 04-Jun-12

O

1

1.5

2

2.5

3

3.5

Closing Price Target Price Initiation/Assumption Rating

RM

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities.

As of October, 2 2012 Analysts’ stock rating are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% or more, (depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

22 October 2012



Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight: The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse’s distribution of stock ratings (and banking clients) is: Global Ratings Distribution

Outperform/Buy* 43% (53% banking clients) Neutral/Hold* 40% (49% banking clients) Underperform/Sell* 15% (41% banking clients) Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

See the Companies Mentioned section for full company names. Price Target: (12 months) for (ULHB.KL) Method: Our target price of RM2.85 for UEM Land is based on our RNAV estimate by assigning an average price of RM50psf for the UEM Land's land bank in Nusajaya. The RM50psf was derived by taking the weighted average land price based on land usage. Risks: The downside risks to our 12-month RM2.85 target price for UEM Land are 1) Breakdown in Malaysia-Singapore relations which will hurt sentiment for Iskandar 2) Hard landing or severe recession, which could delay investments in Iskandar 3) Key ex-Sunrise staff leaves. Upside risks to our target price 1) Singapore developers investing in Nusajaya, 2) confirmation of RTS, 3) easier immigration process and 4) success of catalyst projects and unveiling of new ones

Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names. The subject company (ULHB.KL) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (ULHB.KL) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (ULHB.KL) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (ULHB.KL) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (ULHB.KL) within the next 3 months.

Important Regional Disclosures

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The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (ULHB.KL) within the past 12 months.

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22 October 2012



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22 October 2012

Asia Pacific/Malaysia

Equity Research

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