INVESTMENT HIGHLIGHTS

• 1HFY18 earnings within expectations

• Lower earnings due to high base effect

• 1HFY18 new property sales at RM806.7m

• Maintain BUY with unchanged TP of RM2.80

1HFY18 earnings within expectations. UOA Development Berhad (UOADEV) 1HFY18 core net income of RM150.3m is deemed within expectations, making up 41% and 42% of our and consensus full year estimates as we expect stronger 2HFY18.

Lower earnings due to high base effect. UOADEV 2QFY18 core net income climbed 265.7%qoq to RM118m due to seasonally higher progress billing in second quarter comparing to first quarter. That brought cumulative earnings in 1HFY18 to RM150.3m (-30.6%yoy). Earnings were lower in 1HFY18 as last year earnings in 1HFY17 were boosted by cost adjustment arising from completion of South View Serviced Apartments. Earnings in 1HFY18 were contributed by ongoing projects namely and sale of a completed office tower at Horizon Bangsar South. We expect earnings in 2HFY18 to pick up due to faster progress billing of its property projects. Meanwhile, unbilled sales climbed marginally to RM1.68b in 2QFY18 from RM1.64b in 1QFY18, providing earnings visibility of 1.6 years.

1HFY18 new property sales at RM806.7m. UOADEV chalked up new property sales of RM354.9m in 2QFY18, lower than new sales of RM451.8m in 1QFY18 but higher than new sales of RM309.8m in 2QFY17. That brought total new sales to RM806.7m in 1HFY18, increasing 31.6%yoy from new sales of RM613m in 1HFY17. South Link Lifestyle Apartment in Bangsar South is the biggest new sales contributor by contributing 46% of total new sales followed by United Point Residence (18%) and Sentul Point (14%). Meanwhile, upcoming launches in FY18 include The Park Residences II (GDV: RM600m) in Bangsar South.

Maintain BUY with an unchanged TP of RM2.80. We maintain our earnings forecasts for FY18/19. Our TP is also maintained at RM2.80, based on -10% discount to RNAV. We like UOADEV for (i) its strategy of launching urban-based affordable priced properties, (ii) healthy balance sheet at net cash position, as well as (iii) attractive dividend yield at 6.3%.

Source: MIDF Research - 29 Aug 2018