FY21 CNP of RM196m came above expectations on: (i) stronger-than-expected sales of RM341m vs. our RM300m target, and (ii) stronger-than-expected GP margin during the quarter thanks to cost write-backs on its completed project (South Link Residences). 10.0 sen dividend declared was spot on our estimate. We target RM650m sales in FY22 backed by planned launches of >RM1b from four projects. Unbilled sales at a low of RM92.5m amidst the lack of launches over the past two years. Maintain MP with unchanged TP of RM1.76 on 0.7x FY22E PBV.

Above expectations. 4QFY21 CNP of RM67m lifted FY21 CNP to RM196m, above our/consensus expectations at 129%/118% of estimates, respectively. The outperformance stemmed from: (i) stronger-than-expected 4QFY21 sales of RM106m (of which RM90.4m are completed properties) which lifted FY21 total sales to RM341m – above our RM300m target, and (ii) stronger-than-expected 4QFY21 GP margin of 60% vs. the typical 40-45% range due to cost write-backs upon accounts finalisation from its recently completed project (South Link Residences). Meanwhile, a 10.0 sen final dividend declared was spot on our estimate.

Results’ highlights. QoQ, 4QFY21 CNP of RM67.4m surged 93% on a higher revenue (+150%) as property sales of RM106m was much higher (+182%) compared to 3QFY21 sales of RM38m. We believe the strong sales this quarter is largely attributed to last minute buying prior to the end of the Home Ownership Campaign in Dec 2021. Note that out of the RM106m sales, RM90.4m is completed properties – which enable the group to fully recognise revenue and profits upon sale of these units.

YoY, FY21 CNP decreased 35% mainly due to: (i) lower revenue (- 37%) as a result of less ongoing projects from the absence of launches in FY20, and (ii) lower other income (-14%). Other income came off due to lower rental income since the disposal of UOA Corp Tower (in 3QFY20) and on weaker contributions from its hospitality division impacted by Covid-19.

Urgently needs to launch new projects. Due to the high-rise overhangs, UOADEV have held back launches for the past two years. Consequently, earnings visibility has been severely hampered with unbilled sales currently low at RM92.5m providing less than a years’ visibility. The unbilled sales from its two ongoing projects i.e. Aster Green and Good Wood will see completion this year.

Planned launches for FY22. The RM1b launches scheduled for FY21 has been deferred and would be launched this year. These launches comprise: (1) Laurel Residence at Bangsar South (planned launch in 1QCY22; GDV of RM550m), and (2) Sri Petaling Phase 2 (planned launch in 2Q/3QCY22; GDV of RM480m), (3) Desa 3 Semi-D (RM18m) and (4) a commercial development in Bangsar South (GDV not finalised). Note, these new planned launches will only have greater earnings impact starting late-FY22 once construction works enter more advanced stage. Currently, foundation works for Laurel Residence and Sri Petaling Ph2 have commenced. All in, we keep our FY22 sales target of RM650m.

Despite the earnings outperformance this quarter, we keep FY22E CNP of RM185m as our GP margin assumption is already at a normalized level of 45%. Meanwhile, we introduce FY23E CNP of RM215m. Maintain Market Perform with unchanged TP of RM1.76 pegged to FY22E 0.7x PBV (5-year Mean). Net cash position of the group remains strong at RM1.9b (RM0.83/share).

Source: Kenanga Research - 25 Feb 2022