FY20 CNP of RM306.1m is below both our and consensus expectations at 92% and 86%, respectively. FY20 sales of RM384m is also below at 73% as we had expected stronger sales in 4Q. FY21 dividend of 15.0 sen is above (107%) given its strong net cash position. Lower FY21E CNP by 19% on lower sales to RM480m (from RM900m) on delayed launches. Downgrade to MARKET PERFORM on a lower TP of RM1.76 (from RM1.82) on PBV of 0.69x (-1.5SD). However, we continue to favor UOADEV for its healthy balance sheet and attractive dividend yield of 7.5% given its strong net cash position of 83.0 sen/share.

FY20 CNP of RM306.1m came in below our expectation at 92% and consensus’ at 86% due to a weaker-than-expected top-line which only came in at 72% of our estimate. However, impact to bottom-line was cushioned by higher-than-expected CNP margin of 36% (vs. our expectation of 28%) on lower effective tax rates (21.6% vs. ours of 25%). FY20 sales of RM384m also came in below at 73% of our FY20 target of RM520m, mainly contributed by Aster Green Residence (RM109.8m), Goodwood Residence (RM90.8m), United Point Residence (RM43.3m) and Sentul Point (RM46m). FY20 dividend of 15.0 sen is slightly above our estimate of 14.0 sen (107%) given a strong net cash position.

Results’ highlights. YoY-Ytd, top-line was down by 24% due to lower recognitions, and the halt on construction activities during the MCO and CMCO periods. Revenue was driven by South Link Lifestyle Apartments, Sentul Point Suite Apartments, Goodwood Residence and Aster Green Residence. CNP was down by 16% with lower operating cost (-26%) resulting in slightly better CNP margin of 44% (vs. 43%). QoQ, 4Q20 top-line was down by 14% due to slower progressive recognitions. All in, CNP was down by 25% on a higher effective tax rate of 41% (vs. 14.8%) as certain expenses were not tax deductible. The Group maintains a strong net cash position of 83.0 sen per share (which includes cash and short-term investments).

Outlook. The Group has RM2.9b worth of projects currently under development and had launched Goodwood Residence@ Bangsar South (GDV RM600m) in Sept 2019 (end 3Q19) and Aster Green Residence @ Sri Petaling (GDV RM250m) in Nov 2019 which are expected to contribute positively to FY21 sales. Upcoming future launches with GDV of RM440m are from Bandar Tun Razak Development and UOA Business Park (Phase II) on top of on-going projects and inventory clearing efforts. Unbilled sales of RM312m provide <1-year visibility.

Lower FY21E CNP by 19% to RM284m (from RM350m) on lower FY21 sales of RM480m (from RM900m) as we believe new launches from Bandar Tun Razak and UOA Business Park (Phase II) would be delayed pending improving market sentiment. For now, FY21 will be driven by recognitions from Goodwood Residence, South Link, and Aster Green Residence while we introduce a new FY22E CNP of RM307m will include recognitions from Bandar Tun Razak and UOA Business Park (Phase II) on sales of RM600m.

Downgrade to MARKET PERFORM (from OP) on a lower TP of RM1.76 (from RM1.82). Our TP is lowered based on a lower BV/share of RM2.55 (from RM2.64) on an unchanged P/BV of 0.69x (-1.5SD) given the challenging operating environment faced by the property sector while we believe UOADEV will compromise on short-term earnings by delaying launches given its solid balance sheet. That said, we continue to like UOADEV for its attractive dividends of 8.6% in FY20A and 7.5% in FY21E which is far superior to MREITs’ average of 5.1%.

Source: Kenanga Research - 25 Feb 2021