Journey to Wealth
UOA Development - Above expectations
Period 3Q12 / 9M12
Actual vs. Expectations 9M12 core earnings** of RM230m is above expectations, making 86% of street's and 85% of ours. 9M12 sales hit a record high of RM1.24b (+46% YoY), largely due to Horizon Offices en bloc sales (3 blocks), Le Yuen, Vertical Office, Kencana Square and One@Bukit Ceylon.
Dividends None, as expected.
Key Results Highlights YoY, 9M12 core earnings** was up 19% on higher billings and sales from ongoing projects. Property pretax margins did slide by 4.5ppt to 39% as new projects with heavy infrastructure (e.g. Kencana Square) has commenced; this was anticipated.
QoQ, 3Q12 core earnings** rose 51% to RM111m as the group completed sales of 2 blocks of Horizon Office to LTH for RM204m. As a result, the group's cash pile grew by 148% to RM340m and its net cash positioned improved further to 0.15x.
Outlook Key launches for the next 12-18 months amount to RM3.1b; Kencana Square@Glenmarie (refer below), Scenaria/KiaraIV, Desa III, Desa II Phase 1 (Commercial), Desa Green and Kerinchi SoHo. 4Q12 will see SPA sales from Desa Green (1st two blocks almost fully booked) and Scenaria (preview this weekend).
Change to Forecasts Raise FY12E core earnings by 7% but lower FY13E by 6%. We are bringing forward some of the project recognitions to FY12E due to quicker than expected construction. Unbilled sales of RM0.8b provide 1 year visibility.
Potential earnings upgrade if there are more en bloc sales.
Rating Maintain OUTPERFORM
Investors' need for defensive havens will keep this stock on the radar given FY12-13E net yields of 7.3%-6.2% which is higher than sizeable MREIT dividends yields of 4.5%-5.5%.
Valuation Maintain TP of RM2.30 based on 34% discount to our FD SoP RNAV of RM3.43. TP still implies compelling FY12-13E yields of 5.5%-4.6%.
Risks Sector risks, including negative policies and disappointing dividends.
Source: Kenanga
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