INVESTMENT HIGHLIGHTS

• FY18 earnings beat expectations

• Strong earnings in 4QFY18 due to sale of office tower

• FY18 new property sales at RM1.48b

• Maintain BUY with an unchanged TP of RM2.45

FY18 earnings beat expectations. UOA Development (UOA DEV) FY18 core net income of RM378.6m came in above our and consensus expectations, making up 112% of respective estimates. The positive deviation is attributed to the stronger than expected earnings in 4QFY18 as a result of sale of one office tower. Dividend of 14sen per share was announced which is slightly below our estimate of 15sen per share. Nevertheless, dividend yield remains decent at 6.1%.

Strong earnings in 4QFY18 due to sale of office tower. On sequential basis, 4QFY18 core net earnings climbed 42.7%qoq to RM131.6m as earnings were boosted by sale of one office tower at UOA Business Park. That brought cumulative core net earnings in FY18 to RM378.6m (-25.9%yoy). The lower earnings in FY18 were mainly due to higher cost of sales. Earnings in FY18 were contributed by progressive recognition of the on-going projects (Sentul Point, United Point Residence and South Link) and sale of completed units. Meanwhile, unbilled sales declined to RM1.5b in 4QFY18 from RM1.63b in 3QFY18, providing earnings visibility of 1.2 years.

FY18 new property sales at RM1.48b. UOADEV registered new property sales of RM333m 4QFY18, bringing cumulative new property sales to RM1.48b in FY18. The new sales achieved of RM1.48b in FY18 were higher than new sales of RM1.3b in FY17. South Link Lifestyle Apartment in Bangsar South and United Point Residence contributed to 56% of total new sales in FY18. Meanwhile, key launches in FY19 include Goodwood Residence in Bangsar South and first phase of mixed development project in Sri Petaling.

Maintain BUY with unchanged TP of RM2.45. We revise our FY19 earnings forecast by +3.9% post release of FY18 full year figures. We also introduce our earnings forecast for FY20. We maintain our TP of RM2.45, based on 17% discount to RNAV. Maintain BUY on UOADEV as we like its strategy of launching urban-based affordable priced properties in Klang Valley. Meanwhile, dividend yield remains attractive at 6.1%.

Source: MIDF Research - 26 Feb 2019