KEY INVESTMENT HIGHLIGHTS

• FY19 earnings within expectations

• Lower earnings due to high base effect

• New property sales at RM786.5m

• Earnings estimate reduced

• Maintain BUY with a revised TP of RM2.20

FY19 earnings within expectations. UOA Development (UOADEV) FY19 core net income of RM365.2 m came in within expectations, making up 102% of ours and 95% of consensus’ full year forecast. Dividend of 14sen per share was proposed, which is within our expectation. This translates into dividend yield of 7.1%.

Lower earnings due to high base effect. UOADEV reported lower core net income of RM78.4m (-40.4%yoy) in 4QFY19 due to high base earnings in 4QFY18. Note that 4QFY18 earnings were boosted by sale of one office tower at UOA Business Park. Meanwhile, full year earnings for FY19 was marginally weaker at RM365.2m (-3.5%yoy) despite revenue fell by 12.6%yoy as earnings were partially helped by higher other income (+27.8%yoy). FY19 earnings were mainly derived from earnings recognition from on-going projects in Klang Valley and sale of completed units. On the other hand, unbilled sales decreased to RM989.8m in 4QFY19 from RM1.05b in 3QFY19, providing earnings visibility for less than one year.

New property sales at RM786.5m. UOADEV recorded new property sales of RM203.5m in 4QFY19, lower than new sales of RM265m in 3QFY19. That brought total new sales to RM786.5m in FY19, which is lower than new sales of RM1.48b in FY18 due to lesser project launches in FY19. Goodwood Residence in Bangsar South is the biggest sales contributor, contributing 16% of new sales followed by Sentul Point (14%) and South Link (13%).

Maintain BUY with a revised TP of RM2.20. We cut our earnings forecast for FY20 by -21% to factor in lower new sales achieved in FY19. We also introduce our earnings forecast for FY21F. Corresponding to the earnings downward revision, we lower our TP to RM2.20 from RM2.45 as we widen our RNAV discount to 25% from 17%. Despite new sales of UOADEV took a breather amid lesser launches in FY19, we remain positive on UOADEV’s strategy of focusing on urban based properties within Klang Valley. Dividend yield of UOADEV is also attractive at 7.1%. Hence, we maintain our Buy call on UOADEV.

Source: MIDF Research - 27 Feb 2020