KEY INVESTMENT HIGHLIGHTS

• 1QFY20 earnings deemed within expectations

• Earnings boosted by completion of property projects

• Earnings doubled on yearly basis

• New property sales at RM115m

• Earnings estimates reduced due to lower new sales

• Maintain BUY with a revised TP of RM2.06

1QFY20 earnings deemed within expectations. UOA Development (UOADEV) 1QFY20 core net income of RM126.9m is deemed within expectations despite meeting 43% and 37% of our and consensus full year estimates as 1QFY20 earnings were boosted by completion of property projects while we anticipate earnings in 2QFY20 to be weaker due to delayed construction progress.

Earnings boosted by completion of property projects. On sequential basis, UOADEV 1QFY20 core net income is higher at RM126.9m (+61.9%qoq) as earnings were supported by completion of United Point Residence and decline in administrative expenses (- 26%qoq). That has more than offset the decline in other income (- 16.5%qoq) which were mainly dragged by lower income from investment properties.

Earnings doubled on yearly basis. 1QFY20 core net earnings doubled to RM126.9m from RM63.2m in 1QFY19 as earnings were driven by completion of United Point Residence and earnings recognition of its on-going development projects. Nevertheless, we expect earnings in 2QFY20 to be weaker as enforcement of Movement Control Order (MCO) in March has led to delayed construction progress. Meanwhile, unbilled sales decreased to RM640.9m in 1QFY20 from RM989.8m in 4QFY19, providing earnings visibility for less than one year.

New property sales at RM115m. UOADEV recorded new property sales of RM115m in 1QFY20, lower than new sales of RM203.5m in 4QFY19. United Point Residence is the biggest sales contributor, contributing 26% of new sales followed by Goodwood Residence (22%) and Aster Green Residence (18%). Looking forward, we expect new sales to be weaker in FY20 in the range of RM400m-RM500m due to absence of launches and disruption to business activity due to MCO.

Source: MIDF Research - 30 Jun 2020