We raise UOAD’s fair value to RM2.60. UOAD offers both the yield and beta angles that will help to outperform post election overhang/selldown, while downside is supported by the dividend. In tandem with the sector upcycle, the stock warrants a re-rating. 1Q earnings will be strong, boosted by the gain of an enbloc sale, and the higher-margin sales from Binjai 8 and One @ Bukit Ceylon. Compared to RM1.7bn sales in 2012, 1Q13 sales already hit about RM900m. We see any election selldown a buying opportunity.

Growth, yield and enbloc sales. We argue that the current market with aplenty liquidity is conducive for enbloc property market. Thus far from 2012, UOAD has sold six office buildings at Horizon II. UOA is now left with one building at Horizon II and two smaller buildings at Horizon I. Some enbloc sales at Kencana Square are already under negotiation. The possibility of benefitting from the MRT Line 2 that could pass through Pantai Dalam is a wild card for Bangsar South.

Strong earnings and sales in 1Q. We expect 1Q13 earnings to be about RM110-120m (vs. RM41m in 1Q12 and RM71m in 4Q12). Net gain from an enbloc sale is estimated to make up >50% of the total. As some projects are nearing completion, the final batch of previously held-back units has been successfully sold at higher selling prices, thus yielding higher margins. Again, this has proven the viability and value-enhancing strategy of UOAD. Meanwhile, the property sales of about RM900m in 1Q are mainly contributed by Desa Green and Scenaria, which are 80-90% sold.

Landbank replenishment to boost GDV. Given the cash pile in the balance sheet, UOA has been busy replenishing its landbank, particularly within the Klang Valley. We believe UOA could potentially top up at least another RM1.5-2bn into its portfolio. We estimate that this could raise our RNAV/share by 25-30 sen.

Forecasts. We raise FY13-14 earnings forecasts slightly by 4-6% as some projects will be delivered ahead of schedule. Unbilled sales stand at RM713m in 4Q12.

Reiterate Buy. UOA is our top pick apart from Sunway and IJMLD. We raise our fair value to RM2.60, at 15% discount to RNAV.

Source: RHB