INVESTMENT HIGHLIGHTS

• Acquiring land in Sri Petaling

• Positive on the land acquisition

• Limited impact on balance sheet

• Maintain BUY with a revised TP of RM2.84

Acquiring land in Sri Petaling. UOA Development Berhad (UOADEV) announced that it has acquired 2 ordinary shares in Cosmo Housing Development Sdn Bhd (Cosmo) at a consideration of RM61.1m. Subsequent to the acquisition, Cosmo will become a subsidiary of UOADEV. Note that Cosmo owns 9.4 acres of freehold land in Sri Petaling.

Positive on the land acquisition. We view the acquisition positively as the acquisition will allow UOADEV to continue its strategic focus in Kuala Lumpur. The land is strategically located near the existing township of Sri Petaling and is located within close proximity to the proposed future MRT station in Sri Petaling. Note that UOADEV has exposure in that district as the land is located opposite Le Yuan Residence that was developed by UOADEV few years ago. UOADEV intends to develop mixed development with residential focus complemented by some commercial elements on the land with estimated GDV of RM1b.

Limited impact on balance sheet. The acquisition will be satisfied by cash from internally generated funds. UOADEV is also expected to assume liabilities of RM61m. We estimate UOADEV to remain in net cash position post acquisition as it has RM570m in its cash coffer as at 4QFY17. Meanwhile, we maintain our earnings forecast for FY18/19 pending further details on the launches timeline.

Maintain BUY with a revised TP of RM2.84. Our TP is revised to RM2.84 from RM2.80 as we factor in the contribution of the land to our RNAV. TP is based on 10% discount to RNAV. We maintain our BUY call on UOADEV as we like its attractive dividend yield of 5.7% and healthy balance sheet. Property sales outlook in FY18 will also be driven by launches of urban-based affordable priced properties namely The Park Residence II (GDV: RM600m) and SouthLink (GDV: RM550m) in Bangsar South.

Source: MIDF Research - 26 Feb 2018