INVESTMENT HIGHLIGHTS

• 1QFY19 earnings within expectations

• Lower sequential earnings due to high base effect

• Stable earnings on yearly basis

• 1QFY19 new property sales at RM171.2m

• Maintain BUY with an unchanged TP of RM2.45

1QFY19 earnings within expectations. UOA Development (UOADEV) 1QFY19 core net income of RM60.2m is deemed within expectations despite it makes up only 17% and 16% of our and consensus full year estimates respectively as 1Q is traditionally a weaker quarter.

Lower sequential earnings due to high base effect. On sequential basis, 1QFY19 core net income was lower at RM60.2m (-54.3%qoq). The lower sequential earnings in 1QFY19 were due to high base earnings in 4QFY18. Note that 4QFY18 earnings were boosted by sale of one office tower at UOA Business Park.

Stable earnings on yearly basis. 1QFY19 core net income of RM60.2m was higher on yearly basis at +77.2%yoy. The growing earnings were underpinned by progressive recognition of the on-going projects namely United Point Residence, Sentul Point Suite Apartments, South Link Lifestyle Apartments and sale of completed units. Meanwhile, unbilled sales declined marginally to RM1.4b in 1QFY19 from RM1.5b in 4QFY18, providing earnings visibility of 1.1 years.

1QFY19 new property sales at RM171.2m. UOADEV recorded new property sales of RM171.2m in 1QFY19, lower than new property sales of RM333m in 4QFY18. South Link Lifestyle Apartment in Bangsar South is the biggest sales contributor, contributing 25% of new sales followed by Sentul Point Suite Apartments (19%). Looking ahead, new property sales should be underpinned by its upcoming new launches - The Goodwood Residence (GDV: RM600m) in Bangsar South and Aspen Green Residence (GDV: RM250m) in Sri Petaling.

Maintain BUY with unchanged TP of RM2.45. We make no changes to our FY19/20F earnings forecasts. We also maintain our TP of RM2.45, based on 17% discount to RNAV. We like UOADEV as we are sanguine on its strategy of launching urban-based properties in strategic location within Klang Valley which should be well-received by property buyers. Meanwhile, dividend yield remains attractive at 6.1%.

Source: MIDF Research - 30 May 2019