Period

4Q15/FY15

Actual vs. Expectations

FY15 core earnings of RM399m exceeded expectations, topping street’s FY15 estimates by 11% and 18% of ours. Project billings were significantly better than expected.

The group chalked up RM800m sales over FY15, which missed our expectation of RM1.0b due to some launches being pushed to FY16 amid weak market conditions.

Dividends

Proposed first and final interim dividend of 15.0 sen (7.1% yield) which came in slightly above our expected 14.0 sen. DRP is also applicable for up to the entire portion, subject to approvals.

Key Results Highlights

QoQ, 4Q15 core earnings dipped by 41% given last quarter’s high-base effect due to completion of Vertical Office Suites (VOS).

YoY, FY15 core earnings surged by 43% due to project completions like VOS and Scenaria while EBIT margins were maintained at 37%.

The group’s net cash position has strengthened further to 0.13x (FY14: 0.08x) while its cash pile has grown to RM616m (+110% YoY); if we include the amount in Short-Term Investments, this would aggregate to c. RM1.0b (+41% YoY).

Outlook

Over FY16, the group is expected to launch RM3.23b worth of new projects by phases which will also spill into FY17/18 (refer overleaf).

Change to Forecasts

Lowering FY16E sales by 23% to RM1.0b as market conditions remain weak. Coupled with our house-keeping, we lower our FY16E earnings by 2% and estimate NDPS of 14.0 sen (6.7% yield). Unbilled sales of RM1.11b provide one year of visibility.

Rating

Maintain OUTPERFORM

Valuation

YTD, UOA’s share price has held up well (+1.9%) vs. the KLPRP Index returns of -5.6% and big cap developers’ (>RM3b mkt cap) average of -5.5%. Although the sales came in weaker than expected in FY15, we still like UOA for: (i) its defensive quality and a strong net cash position with pure exposure in Kuala Lumpur, and (ii) its development margin, which is one of the best in the industry, a positive and defensive factor in light of the lukewarm prospects for the property market over the next 12 months. Maintain TP of RM2.22 based on a discount of 44% to its FD RNAV of RM4.00. Our TP implies FY16E net yield of 6.3%, which provides sufficient risk premium when compared to sizeable MREITs’ average net yield of 5.6%.

Risks to Our Call

Weaker-than-expected property sales, higher-thanexpected sales and administrative costs, negative real estate policies, tighter lending environments

Source: Kenanga Research - 26 Feb 2016