News    Proposed acquisition of freehold land 11.1ac along Jalan Ipoh for RM130.3m or RM270psf (refer overleaf for location details). The land is earmarked for mixed development, although GDV and plot ratio are unknown at the moment. 

Comments    Land price is fair as current land along Jln Ipoh are RM220-230psf for residential and RM365-380psf for commercial lands. The acquisition will be financed by cash, which is doable given their strong net cash position. Post acquisition, FY13E net cash position will decrease to 0.05x from 0.13x. 

The said lands are contiguous to UOAD’s existing Jln Ipoh land, so total land size increases to 27.9ac. Although GDV was not guided by management, the existing Jln Ipoh land (16.8ac) has a GDV of RM1.75b. So based on an extrapolated GDV extraction rate of RM104m/ac, the enlarged Jln Ipoh land should yield a GDV of RM2.91b, which will increase our FD RNAV by 5% to RM3.60. 

The announcement is not a big surprise as we understand that UOAD has been scouting for landbanks in matured locations. While the announcement is a positive in terms of the land price being fair with sufficient GDV replenishment, it will be overshadowed by negative sentiments brought about by potential cessation of DIBS by Bank Negara, particularly when UOAD tends to sell their projects using DIBS. 

Outlook   We are waiting for Bank Negara’s decision on DIBS and until then, we can expect the stock to range-bound after the recent sharp correction. 

Forecast   No changes to earnings. The project will likely commence its previews in late FY14, so project contributions will be more significant in FY15 onwards.  

Rating   UNDER REVIEW (previously OUTPERFORM)

Valuation   All our developers' CALLs/TPs are currently under review pending our 3Q13 strategy, which will be released next week. Our previous TP for UOAD was RM2.60, which would be a 28% discount to the enlarged FD RNAV of RM3.60.

Risks   Sector risks, including negative policies and disappointing dividends.

Source: Kenanga