FY19 CNP of RM364.6m came in well within our and consensus expectations at 100% and 95% respectively. FY19 sales of RM786.5m came in slightly below at 91%. Dividend of 14.0 sen is also well within (100%). The Group has RM440m in new launches whilst continuing its inventory clearing efforts. Maintain FY20E CNP and introduce FY21E CNP of RM376m. Maintain OUTPERFORM and TP of RM2.15.

Well within expectations. FY19 CNP of RM364.6m came in well within our and consensus expectations at 100% and 95%, respectively. However, FY19 property sales of RM786.5m were slightly below our forecast at 91% as our expectations may have been too optimistic with the market more challenging than anticipated. FY19 sales were driven by Goodwood Residence, Sentul Point and South Link. FY19 dividend of 14.0 sen is also well within our expectation of 14.0 sen given its strong net cash position.

Results’ highlights. YoY, top-line was down by 13% due to higher recognitions in 4QFY18 due to the sale of an office tower in UOA Business Park while FY19 recognitions were mainly made up from progressive recognition of the Group’s on-going development projects namely United Point Residence, Sentul Point Suite Apartments, and South Link Lifestyle Apartments. However, bottom-line was up by 9% on: (i) slightly better EBIT margin (+1.8ppt), and (ii) higher finance income in FY19 vs. only finance cost in FY18. QoQ, top-line declined by 21% as the previous quarter was a high base on revenue recognitions from United Point Residence and Sentul Point Suite Apartments. As a result, bottom-line declined by 24%. The group remained in a strong net cash position.

Outlook. The Group has RM4.62b worth of projects currently under development while upcoming new launches totalling RM440m in GDV are: (i) Bandar Tun Razak, Cheras (GDV RM300m) which has started construction and may be operator-run, and (ii) UOA Business Park Phase II (RM140m). The Group has recently launched Goodwood Residence@ Bangsar South (GDV RM600m) in Sep 2019 and Aster Green Residence @ Sri Petaling (GDV RM250m) in Nov 2019 which is expected to contribute positively to FY20 sales on top of on-going projects and inventory clearing efforts.

Maintain FY20E CNP of RM332m and introduce FY21E CNP of RM376m. We maintain FY20E sales target of RM963m and introduce FY21 sales of RM1b. FY20-21 will be driven by recognitions from previous launches mostly Goodwood Residence, Aster Green Residence, Bandar Tun Razak and UOA Business Park Phase II. Unbilled sales of RM990m provide c.1-year visibility.

Maintain OUTPERFORM with an unchanged TP of RM2.15. Our TP remains unchanged on our adjusted P/BV valuation as a gauge to ascertain the trough valuations of property stocks amid the prevailing market down-cycle. Our TP is based on a slightly lower P/BV of 0.90x (from 0.93x) @ -0.5SD of its 3-year historical band on an adjusted BV/share of RM2.39 (from RM2.33) after imputing a 40% discount to its latest available inventory level of completed properties. UOADEV remains an OP backed by attractive dividend (7.1% yield which offers a premium over sizeable MREITs with net yield of 4.4%) and a strong net cash position.

Risks to our call include: weaker-than-expected property sales, margin fluctuations, and changes in real estate policies and/or lending environment.

Source: Kenanga Research - 27 Feb 2020