• Maintain NEUTRAL and MYR1.78 TP, 6% downside with c.5% FY22F yield. UOA Development’s 1Q22 results missed expectations, due to slower billings from The Goodwood Residence (TGR) and lower inventory sales QoQ. Its sales momentum remained healthy, with MYR103m sales in 1Q22, while 2Q sales should see higher contributions from TGR and the recently launched Laurel Residence in Bangsar South. We expect UOAD to hit MYR400-500m in property sales by end 2022.

• 1Q22 results. Revenue and earnings fell YoY and QoQ, as billings from TGR and sales of remaining inventory in United Point Residence and Sentul Point Suite Apartments were much higher in the previous quarter. Its new project Laurel Residence (GDV: MYR550m) made its maiden contribution, as it was launched in Mar 2022. Other income was up 32% YoY, as income from hospitality and retail has improved substantially post the re-opening of the economy. Meanwhile, its EBIT margin narrowed QoQ, on cost adjustments for South Link and South Point post completion in 4Q21.

• Decent sales in 1Q22. 1Q22 new sales totalled MYR102.9m, vs MYR106m in 4Q21. Laurel Residence was the key sales driver during the quarter, contributing MYR68.4m to the total. Other contributors include TGR (MYR13.1m) and United Point Residence (MYR7.7m). Since its launch in March, Laurel Residence has reached a booking rate of >40% (take-up as at end March: 23% for only Block B).

• Encouraging sales for TGR in 2Q22F. Although this project’s units were only 48%-sold as at end March, sales picked up more substantially in April- May as the project is nearing completion – which helps to boost buyer interest and confidence. Management indicated that booking rate for the project is already >60%. In the pipeline, Sri Petaling Phase 2 (GDV: MYR480m) is scheduled to be launched in 2H22. The commercial project in Bangsar South, which comprises strata office lots and some medical suites, is still under planning. This project may be rolled out in end-2022 or early 2023.

• We make no changes to our earnings forecasts. TGR will likely be handed over in June/July, while Aster Green is slated for completion in 2H. Unbilled sales rose to MYR122.9m, vs MYR92.5m as at 4Q21. As for the potential venture in Vietnam, management has called it off for now – due to a disagreement over some terms with the JV partner. The company will explore opportunities in other geographical areas, given its war chest (net cash of MYR1.8bn).

• ESG. Our TP is based on an unchanged 45% discount to RNAV and 0% ESG discount/premium given our ESG score of 3.0 (in line with the country median), using our in-house methodology.

Source: RHB Research - 31 May 2022