INVESTMENT HIGHLIGHTS

• 1QFY18 earnings below expectations

• Earnings dragged by higher expenses

• 1QFY18 new property sales at RM451.8m

• Earnings forecast reduced

• Maintain BUY with a revised TP of RM2.80

1QFY18 earnings below expectations. UOA Development Berhad (UOADEV) 1QFY18 core net income of RM32.3m came in below expectations, making up 7% and 8% of our and consensus full year estimates. The negative deviation could be attributed to the slowerthan-expected progress billing and higher-than-expected expenses.

Earnings dragged by higher expenses. UOADEV’s 1QFY18 earnings fell 31.4%yoy to RM32.3m in 1QFY18 despite revenue was higher by 11%yoy. The decline in earnings was partly attributed to higher expenses (+28%yoy) in 1QFY18. Meanwhile, earnings in 1QFY18 were mainly contributed by ongoing projects (United Point Residence, Sentul Point and South Link Lifestyle Apartments) and sale of completed projects (Desa Green Serviced Apartment). On sequential basis, core net income is lower by 68.4%qoq due to seasonally lower progress billing in first quarter. Note that we have excluded one-off gain from remeasurement in our 4QFY17 core net income calculation. Meanwhile, unbilled sales grew to RM1.64b in 1QFY18 from RM1.37b in 4QFY17, providing earnings visibility of 1.5 years.

1QFY18 new property sales at RM451.8m. New property sales of UOADEV are encouraging in 1QFY18. UOADEV registered new sales of RM451.8m in 1QFY18, higher than new sales of RM303.2m in 1QFY17 and new sales of RM375.8m in 4QFY17. 67.4% of new sales in 1QFY18 were contributed by South Link Lifestyle Apartment in Bangsar South, 11% by United Point Residence, 10% by Sentul Point, 5.4% by Desa Green and remaining 6.2% by other projects. Going forward, sales of UOADEV is expected to be continue driven by South Link Lifestyle Apartment (GDV: RM550m) in Bangsar, phase two of Southbank (GDV: RM130m) in Old Klang Road and The Park Residences II (GDV: RM600m) in Bangsar South.

Source: MIDF Research - 25 May 2018