UOAD’s 3Q13 results met  expectations.  The group  has acquired a 13.5-acre land in Sentul to  develop  mid-end housing to  suit market needs. While  current valuations have largely priced in the negative impact of the  cooling  measures,  we  are  keeping  our  NEUTRAL  call  amid  the prevailing negative sentiment on the sector.  We lift our FV to MYR2.45 (from MYR2.35) on higher RNAV from the addition of the new land.

• Within  expectations.  UOAD’s  3Q13  results  came  in  within  our  and market  expectations.  Key  projects  that  contributed  to  revenue  include One @ Bukit Ceylon, Desa Green, Le Yuan Residence, Vertical Office Suites and Scenaria, as well as some sales of unsold inventory (such as Binjai 8 and Kepong Business Park).  The sequential  decline in  earnings was  due  to  the  sale  of  a  small  office  block  in  Horizon  Ph.  1  for  about MYR45m in 2Q13.  The quarter also saw the recognition of MYR37m fair value  adjustment  on  investment  properties  –  Camellia  Serviced  Suites (MYR28m) and Plaza Menjalara in Kepong (MYR9m).
• MYR1.57bn  new  sales  for 9M13.  There were no new launches in 3Q. 9M13  new  property  sales  reached  MYR1.57bn  from  MYR1.34bn  in 1H13.  Key contributors were  the  three  office towers at Kencana Square and  a  higher  take-up  rate  from  Camellia  Serviced  Suites,  Le  Yuan Residence  and Vertical Office Suites. Going into 4Q, sales from South View Residence  at Kerinchi  (MYR600m GDV) will kick in. The first block has  already achieved a booking rate of >60%.  We expect  sales to pick up as demand for properties in good locations  at affordable  prices  (low absolute  unit  price)  will  remain  intact  despite  the  cooling  measures. Meanwhile, the take-up rate for Scenaria remained unchanged at 42%.
• Forecasts. We make no changes to our forecasts. Earnings contribution from  the  new  Sentul  land  is  expected  to  kick  in  from  FY15  onwards. Unbilled sales remained  steady at MYR1.2bn,  flat  from 2Q13.  The Jalan Ipoh and Kepong projects are slated for launch in 2014.
• Maintain  NEUTRAL.  Although  valuations  are  getting  more  attractive, considering  the  current  negative  sentiment  on  the  sector,  we  maintain our NEUTRAL rating on UOAD.  Given its higher  RNAV with the addition of  the  new Sentul land, we raise our FV to MYR2.45 (from MYR2.35), at a  25%  discount  to  RNAV.  The  company’s  strong  net  cash  of MYR193.2m will continue to support its attractive dividend yield.

New land in Sentul
Yesterday  evening,  UOAD  also  announced  its  acquisition  of  a  13.5-acre  freehold land  in  Sentul  for  a  purchase  consideration  of  MYR130.3m.  This  translates  into  a land  cost  of  MYR221.62  psf,  which  is  deemed  reasonable.  The  land  is  located  in close  proximity to the city centre, and  is  easily accessible via DUKE highway. It is planned  for  a  mid-end  residential  property  development,  with  an  indicative  ASP  of MYR550-600  psf,  amounting  to  a  GDV  of  MYR2bn.  As  development  planning  has been started earlier, this project can therefore be launched in mid-2014.

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Company Profile
UOAD is a Klang Valley-based developer. The company specialises in building high-rise residential and commercial developments. Its flagship development at Bangsar South has seen strong enbloc transactions.

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Source: RHB