• UOAD achieved lower new property sales of RM462m in 9MFY23, as planned launches in 2H23 have been delayed to 2024.

• 9MFY23 core net profit was relatively flat yoy despite a 14% drop in revenue. 9MFY23 EBITDA margin improved to 72% (vs. 61% in 9MFY22).

• Downgrade to Reduce as we believe the positives are already priced in. The stock is currently trading above its five-year P/BV mean of 0.7x.

9MFY23 Core Earnings Were Relatively Flat Yoy

In 3QFY23, UOAD reported core net profit (excluding forex and impairment) of RM56.8m (-40% yoy, -14% qoq), taking 9MFY23 core net profit to RM169.7m (+1% yoy). This accounted for 85% of our FY23 estimates and 78% of Bloomberg consensus’ estimates. The discrepancy to our estimates was mainly due to better-than-expected hospitality segment income and rental income. 9MFY23 revenue was lower by 14% yoy on lower progressive recognition from the ongoing developments. No dividend was declared.

Lower 9M23 New Property Sales

In 3QFY23, the group achieved new property sales of RM159m, taking 9MFY23 property sales to RM462m (vs. RM480m in 9MFY22). This was supported by Aster Hill (RM154.5m), the Goodwood Residence (RM145.3m), Laurel Residence (RM120.8m) and United Point Residence (RM30.6m). We believe UOAD is on track to meet our property sales forecast of RM608m in FY23F, on the back of existing developments.

Planned Project Launches Delayed to 2024

As at end-Sep 23, unbilled sales stood at RM322.8m, which translates to c.0.7x cover ratio, or less than a year’s visibility. However, this is higher than RM181m unbilled sales as at end-Sep 22. UOAD has guided that the three projects with a total estimated GDV of RM1.3bn — namely, Desa 3, Bamboo Hill Residence, and two blocks of office towers in Bangsar South, which were slated to be launched in 2H23 - has been delayed to 2024 instead. Currently, there are two ongoing developments - Laurel Residence (64% take-up rate) and Aster Hill (33% take-up rate for Block A and 8% take-up rate for Block B).

Downgrade to Reduce

We raise our FY23-25F core net profit estimates for UOAD by 6.5-13.5% after imputing higher hospitality segment contributions and rental income. TP slightly raised to RM1.68 (on higher EPS forecast), still based on an unchanged 0.7x FY24F P/BV (five-year mean). However, we downgrade the stock to Reduce from Hold previously, as we believe the positives have already been priced in. Current P/BV valuation has already exceeded its five-year mean level of 0.7x, which is also higher than the sector average of 0.5x. It is also trading at 18.5x FY24 P/E, above the industry average of 15x. De-rating catalysts are lower property sales on delayed launches and low take-up rates. Upside risks include strongerthan-expected new sales, and higher-than-expected dividend payout.

Source: CGS-CIMB Research - 28 Nov 2023