• Maintain NEUTRAL and MYR1.78 TP, 5% upside. UOA Development’s 2Q22 results came in below expectations. 1H property sales have already reached MYR250.9m, and we expect the figure to hit MYR400-500m by end-2022. We cut our FY22-24 earnings forecasts by 14-15% as the pipeline launches are being deferred, and progress billings for new projects will likely pick up only after its construction works pass the initial stage.

• 2Q22 results. Sequential revenue and earnings were stronger, largely due to the completion of Goodwood Residence during the quarter, as well as better sales from Laurel Residence. Meanwhile, cost adjustment arising from the completion of Goodwood Residence will likely be recognised only in 3Q22.

• Stronger sales in 2Q22. 2Q22 new sales achieved MYR148m vs only MYR102.9m in 1Q22, bringing 1H sales to MYR250.9m. Laurel Residence, which was launched in March this year, contributed MYR126.3m in sales. Other contributors include Goodwood Residence (MYR69.2m), United Point Residence (MYR28.1m) and Sentul Point (MYR9.8m). Laurel Residence Block B and Goodwood Residence are now 42% and 56% sold (from 23% and 48% in 1Q22).

• Upcoming launches. Laurel Residence Block A – which was released in June – together with Goodwood Residence, are expected to drive sales in 2H. As such we think it is still possible for UOAD to hit MYR400-500m sales by year end. In the pipeline, Sri Petaling Phase 2 (GDV: MYR480m) is scheduled to be launched only in 4Q22. As for the commercial project in Bangsar South, which comprises strata office lots and some medical suites, it will now only be launched next year.

• Potential downside risk to earnings. We cut our FY22-24 earnings forecasts by 14-15% given the revised timing of pipeline launches. We expect progress billings from Laurel Residence to pick up only in mid 2023 after its construction passes the early stage. Meanwhile, Aster Green Phase 1 is slated for completion in 3Q22. Unbilled sales stayed relatively unchanged at MYR123.9m vs MYR122.9m as at 1Q22.

• 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 - 24 Aug 2022