Period  4Q13 / FY13

Actual vs. Expectations FY13 core net profit of RM346m is within street’s expectation (at 103%). However, it is slightly ahead of our estimates (at 108%) due to better-than-expected margins.

 Full year sales of RM2.0b (+19% YoY) is considered within expectation as it is only 5% above our assumption of RM1.9b. Thanks to strong take-up rate of the South View project, 4Q13 sale did tremendously well rising 98% QoQ to RM455m.

Dividends  Proposed first and final single-tier dividend of 13.0 sen (6.5% yield) fell spot-on to our expectation. Pending shareholders’ approval, the company is recommending a dividend reinvestment scheme up to the entire portion of the proposed dividend.

Key Results Highlights QoQ, revenue surged by 63% largely due to the completion of One@Bukit Ceylon. Other income rose to RM64.2m from RM15.6m driven by the recognition of an en-bloc sale at The Horizon, Bangsar South. These helped to negate the increase in operating expenses, which surged from RM26.6m to RM80.6m because of higher marketing cost, pre-opening expenses from their hotel division and higher staff costs. The group also registered provisions of RM48.3m deferred taxes due to previous investment property sales and non-cash fair value adjustments. Stripping out the deferred tax, core earnings rose by 175% to RM114m.

 YoY, FY13 core earnings rose by 14% to RM345m although revenue surged by 56%. This is because FY13 saw more property billings and en-bloc sales from inventories compared to FY12 which transacted more sales of investment properties (en-bloc sales from The Horizon) where the cash gains are mainly captured in ‘fair value adjustments’.

Outlook  For 2014, the group has earmarked RM2.0b worth of new launches while they have some RM0.4b worth of unsold properties (excluding office en-blocs). The bulk of the new launches are likely to be priced at an average of RM600k-800k/unit, which is easily digestible considering that most of these projects are in prime matured residential areas of Klang Valley.

Change to Forecasts Slight increase to FY14E earnings (+4%), post housekeeping. We maintain our FY14E sales estimates at RM2.1b. Unbilled sales are at a record high of RM1.3b or slightly more than one-year visibility. We have also raised our FY14E NDPS to 14.0 sen (7.0% yield) from 13.0 sen which would be similar to FY13E’s payout ratio of 51%.

Rating Maintain MARKET PERFORM

Valuation  Maintain TP of RM2.10 based on 43% discount to our FD RNAV of RM3.69. Our TP implies attractive net yields of 6.7%. UOA has low borrowings and is in a strong net cash position, which more than supports its ability to maintain its 50% payout from core profits.

Risks  Sector risks, including weaker sales, negative policies and disappointing dividends.

Source: Kenanga