Period  4Q14/FY14

Actual vs.Expectations FY14 core earnings of RM279m were slightly belowstreet expectations but within ours as it made up 93%of street’s estimates and 104% of ours. Market mayhave overestimated the development margins.

 The group chalked up FY14 sales of RM1.6b (-18%YoY) which is within our estimate of RM1.6b. Keydrivers were South View, Scenaria, SouhtbankResidence and Desa Sentul Phase I.

Dividends  Proposed first and final interim dividend of 13.0 sen(6.1% yield), is spot-on with our estimates. DRP is alsoapplicable for the entire dividend portion, subject toapprovals.

Key ResultsHighlights QoQ, 4Q14 core earnings dipped by 14% as EBITmargins compressed by 6.7ppt to 38.0%. This was dueto: (i) last quarter’s high base which saw the completionof Le Yuan and lumpy Scenaria sales, (ii) hospitalitypre-opening expenses (e.g. Capri & Nexus @ BangsarSouth) which caused admin/general expense to rise by52%.

 YoY, FY14 core earnings was down by 19% largelybecause the previous year saw RM226m worth of enblockoffice inventory sales with rich margins whichflows directly to the bottomline. Additionally, pretaxmargins came off by 3.7ppt to 42.7% due to highermarketing expenses and the reasons mentioned above.

Outlook  FY15 launch size has been reduced by 67% toRM720m GDV, which was a negative surprise to us.UOA does not provide sales target guidance. Emphasiswill be on delivery this year, particularly given thechallenging property landscape this year. (Referoverleaf).

Change toForecasts Lowering FY15E core earnings by 5% post our housekeepingas we lower our FY15E sales assumptions by18% to RM1.3b. However, the two major projectdeliveries this year will lend strength to dividend payoutabilities while the stock remains firmly in a net cashposition. Thus, we maintain FY15E NDPS of 13.0 sen.Unbilled sales are up by 11% to RM2.0b which givesclose to two years’ visibility which is slightly more thanits peers’ 1-1.5 years.

Rating Maintain MARKET PERFORM

Valuation  Maintain TP of RM2.00 based on 47% discount to FDRNAV of RM3.75. We view UOAD as a defensivedeveloper given its strong net cash position, very richmargins and conservative approach. Our TP impliesFY15E net yields of 6.5% which is a decent premium tosizeable MREITs average net yields of 5.7%. While ourTP implies less than a 3% total return, we view that themarket is likely to favour defensive stocks duringchallenging times. Thus, we recommend that investorshold on to the stock.

Risks to OurCall Unable to meet its sales target or better-than-expectedsales/earnings. Unexpected en-bloc sales of officeinventories. Sector risks, including further negativepolicies.

Source: Kenanga