• Upgrade to BUY from Neutral, with new MYR1.90 TP from MYR1.78, 15% upside and 6% yield. UOA Development’s 4Q22 results beat expectations, mainly due to better-than-expected property sales. Full-year property sales hit MYR638.2m (+87% YoY) and we expect this year’s sales at MYR700-800m. Outlook for 2023 is likely to be exciting given the encouraging launch pipeline, including the highly anticipated Bamboo Hill Residence at Jalan Ipoh. Net cash of MYR2.16bn is awaiting deployment, as soon as strategic investment opportunities arise.

• 4Q22 results. Revenue fell QoQ mainly due to higher sales of completed units in Goodwood Residence and Aster Green Residence Phase 1, as well as higher progress billings from Laurel Residence. The previous quarter also saw the effect of cost adjustments arising from the completion of Aster Green and Goodwood Residence. Similar to FY22, a 10 sen DPS was declared, representing a dividend payout rate of slightly above 100%.

• Sales momentum remained healthy in 4Q22. 4Q22 new sales achieved MYR158.2m vs MYR229.1m in 3Q22. Full-year sales amounted to MYR638.2m, compared to MYR341.2m in FY21. Key contributors included Laurel Residence (MYR276.5m), Goodwood Residence (MYR242m), as well as some older inventory units in United Point Residence (MYR75.1m).

• Exciting launching pipeline in 2023. Goodwood Residence and Laurel Residence are now >80% and 46% sold. A number of new projects will be rolled out this year, as management is more optimistic with the market outlook. Aster Hill (GDV: MYR480m) will be the first project to be launched in 2023 as UOAD has just obtained the advertising permit & developer’s license (APDL). In view of the encouraging demand for office space in Bangsar South, the company will also launch its Vertical Office, which is next to Vertical Corporate Tower. The development has a GDV of MYR1.3bn, and about one-third of it is planned for sale (small unit of strata offices), while the balance will be kept as investment property. The highly anticipated maiden launch of Bamboo Hill Residence will be in 3Q23. While management has yet to fix the pricing, we expect an ASP of MYR600-700 psf for the area. We understand that the residential blocks will be located near to the MRT station and the current F&B pavilions there are gaining good traction that should help to garner strong demand for the properties.

• Earnings forecast. We raise our FY23-24 earnings forecasts by 4-6% in view of the active launch pipeline. Unbilled sales increased to MYR203.4m vs MYR181.1m as at 3Q22.

• ESG. Our TP is now based on 40% discount to RNAV and 0% ESG discount/premium given our ESG score of 3.0 (in line with country median), using our in-house methodology.

Source: RHB Research - 23 Feb 2023