INVESTMENT HIGHLIGHTS

• Acquiring landbank near Bangsar South

• Positive on the land acquisition

• Balance sheet remains strong

• Maintain Neutral with unchanged TP of RM2.75

Acquiring landbank near Bangsar South. UOA Development Berhad (UOADEV) announced that it had entered into a sale and purchase agreement with Suileem Realty Sdn Bhd for the acquisition of a freehold piece of land measuring 9,686.682 square metres (2.39 acres) near Bangsar South for RM81.1m. The land acquisition is expected to be completed by 3QFY17.

Positive on the land acquisition. We are positive on the land acquisition as the land acquisition would enable UOADEV to strengthen its presence in Bangsar South where we see stable long-term outlook for property in Bangsar South due to the prime location of Bangsar South. Note that the land is strategically located within close proximity to UOADEV’s Bangsar South City. UOADEV plans to develop the land into a commercial development to complement its current project developments in Bangsar South City. The land acquisition is in line with UOADEV’s strategy of focusing on property development within Klang Valley and building strong brand as a city property developer.

Balance sheet remains strong. Valuation for the land works out to be RM778 per sq ft. which is fair in our view as it is within asking price of RM592 per sq ft. – RM1200 per sq ft. of surrounding area in Bangsar South. UOADEV intends to fund the land acquisition by cash from internally generated funds where we see funding is not an issue to UOADEV considering its cash pile of RM700m as at end March 2017. Balance sheet of UOADEV will remain sturdy at net cash position post the land acquisition. Meanwhile, we see minimal earnings impact from the land acquisition in FY17/18 at this juncture as GDV and launches timeline are yet to be finalised. Hence, we maintain our earnings forecast for FY17/18.

Maintain Neutral with unchanged TP of RM2.75. Pending the completion of the deal, we maintain our RNAV and TP. Our TP is based on 10% discount to RNAV. Maintain Neutral on UOADEV due to limited upside. Dividend yield is attractive at 5.7%.

Source: MIDF Research - 26 May 2017