INVESTMENT HIGHLIGHTS

• 1QFY17 earnings deemed in line

• Weaker earnings yoy

• 1QFY17 new property sales at RM303m

• Maintain Neutral with unchanged TP of RM2.75

1QFY17 earnings deemed in line. UOA Development Berhad (UOADEV) 1QFY17 core net income of RM43.4m is deemed within expectation despite only making up 11% of our and consensus full year estimates as we expect stronger quarters ahead due to higher progress billing from strong property sales secured in FY16.

Weaker earnings yoy. UOADEV’s 1QFY17 core net income declined 55%yoy, mainly due to lower progressive earnings recognition of the weak property sales of RM800m secured in FY15 while last year earnings were boosted by strong profit margin. Looking ahead, we expect UOADEV FY17 earnings to be driven by the stellar new property sales in FY16. Recall that UOADEV new property sales surged 77% to RM1.42b in FY16 from RM800m in FY15, driven by launches of United Point project (GDV: RM1.5b) and Sentul Point project (GDV: RM1.5b). On a separate note, 1QFY17 unbilled sales stood at RM1.57b (increase from RM1.46b in 4QFY16), providing earnings visibility of 1.6 years.

1QFY17 new property sales at RM303m. UOADEV recorded new property sales of RM303m in 1QFY17 (at 19% of our full year new sales target of RM1.6b), increasing 79%yoy yet declining by 44%qoq. Bulk of the new sales in 1QFY17 was contributed by Sentul Point project (48%) and United Point project (44%). The two projects continue to drive property sales of UOADEV, thanks to the affordable offering of the two projects. Looking ahead, UOADEV will launch the remaining blocks of the two projects in addition to its new projects launches being Desa Commercial Centre (GDV: RM300m) and Bandar Tun Razak development in Cheras (GDV: RM300m). Meanwhile, residential portion of The Sphere in Bangsar South has been taken out of planned launches for FY17 due to change in redevelopment plan.

Maintain Neutral with unchanged TP of RM2.75. We maintain our earnings forecast for FY17/18. Our TP is unchanged at RM2.75, based on 10% discount to RNAV. We have recently downgraded UOADEV to Neutral from Buy due to limited upside. Nevertheless, fundamentals of UOADEV remain intact with decent property sales and healthy balance sheet with net cash position. Dividend yield remains attractive at 5.5%.

Source: MIDF Research - 23 May 2017