UOADEV’s 1HFY22 results met expectations. We like UOADEV for its strategy to focus on mid-priced residential products amidst a soft property market, the highly sought after addresses of its landbank in urban locations and a strong war chest (a net cash of RM1.9b) that puts it in a good position for opportunistic deals. We maintain our forecasts but fine-tune down our TP to RM1.75 (from RM1.76) as we rationalise our valuation method to RNAV (from PBV). Maintain MARKET PERFORM.

Within expectations. UOADEV’s 1HFY22 CNP of RM69m came in at only 37% and 40% of our full-year forecast and the full-year consensus estimates respectively. However, we deem the results within expectations as we expect stronger 2H backed by: (i) Write-backs of over-provision of costs upon completion and account finalisation of Aster Green and Good Wood Residence by this year; and (ii) sales from its planned launches during 2H.

Its 1HFY22 revenue and CNP decreased 51% and 26% YoY due to depleting unbilled sales of RM92.5m at the start of FY22 (vs. RM312m a year ago). The depleting unbilled sales were in turn a result of the lack of new launches during the pandemic years.

During 1HFY22, it recorded property sales of RM251m which is on track to meet our full-year assumption of RM650m. YTD, it has put onto the market RM550m worth of GDV from Laurel Residence. For 2HFY22, it plans to put onto the market: (i) Sri Petaling Phase 2 (GDV of RM480m); and ii) Desa 3 semi detached homes (GDV of RM18m). It is also toying with the idea of launching a commercial development in Bangsar South during the year (GDV pending finalisation). As at end-June 2022, its unbilled sales stood at RM124m.

We like UOADEV for: (i) its strategy to focus on mid-priced residential products amidst a soft property market; (ii) the highly sought-after addresses of its landbank in urban locations; (iii) the recovery in its hotel and MICE operations on the heels of the reopening of the economy and international borders; and (iv) a strong war chest (a net cash of RM1.9b) that puts it in a good position for opportunistic M&As and land acquisitions. We maintain our forecasts but fine-tune down our TP to RM1.75 (from RM1.76) as we rationalise our valuation method to a 55% discount to RNAV (from 0.74x PBV). The 55% discount ascribed is lower than 60-65% of its peers to reflect UOADEV’s above mentioned strengths. There is no adjustment to TP based on its 3-star ESG rating as appraised by us (SEE Page 4). Maintain MARKET PERFORM.

Risks to our call include: (i) a prolonged slowdown in the property, hospitality and MICE sectors; (ii) rising mortgage rates eroding affordability; and (iii) changes to urban development policies in the Klang Valley.

OTHER POINTS

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

Source: Kenanga Research - 24 Aug 2022