Fair value gain

UOA’s 3Q16 results in line with market expectations but above ours. We were surprised by the fair value gain of RM55.5m on its investment properties. Core net profit fell 11% yoy to RM272m, which was within our expectation. The delay in launching its Jalan Ipoh project to 2018 and new shares issued for its dividend reinvestment plan led us to cut our EPS forecasts by 14-21% for FY17-18E. FY17E PER of 11x and net dividend yield of 6% remain attractive. Maintain BUY with target price of RM2.64, based on 30% discount to RNAV.

Above expectation

Net profit of RM331m in 9M16 (+8% yoy) made up 89% of full-year consensus forecast of RM372m but exceeded our previous estimate of RM318m. The slower sales of RM0.8bn in 2015 (compared to RM1.64bn in 2014) contributed to the 36% yoy fall in revenue to 726m for 9M16. But the higher EBITDA margin of 51.4% in 9M16 compared to 38.7% in 9M15 resulted in a smaller 15% yoy decline in EBITDA to RM373m. Net profit fell 11% qoq and 30% yoy to RM110m in 3Q16 on the back of lower revenue and EBITDA margin. The earnings decline was despite recognising the one-off fair value adjustment on investment properties of RM55.5m.

Property sales improved yoy, unbilled sales of RM1.5bn

New property sales of RM1.15bn in 9M16 exceeded the RM0.8bn sales in FY15. The new sales mainly came from its United Point Residence, Sentul Point and Danau Kota residential projects (cumulative take-up rates of 52%, 36% and 71% respectively). UOA focused on launching units costing below RM700k (average selling price of RM500-600 psf) that is seeing reasonable demand. The Sentul Point project was just launched in 3Q16, explaining the low take-up rate. Unbilled sales increased to RM1.51bn, which will contribute to revenue over the next 3 years.

Lower new launches planned for 2017

After launching RM3.23bn worth of properties in 9M16, there are no new launches planned in 4Q16. UOA has also delayed the launch of its Jalan Ipoh project with gross development value (GDV) of RM6bn to 2018 to resubmit its master plan. Hence, the lower value of planned launches worth RM1.59bn for 2017 comprising Desa Business Suites in Taman Desa, The Sphere in Bangsar South and affordable homes in Selayang.

Maintain BUY with an unchanged TP of RM2.64

We continue to like UOA for its strong management, good product branding and strong net cash position (RM0.43/share). Maintain BUY. Risk to our view is a prolonged downturn of the Klang Valley property market

Source: Affin Hwang Research - 24 Nov 2016