• NEUTRAL, new TP of MYR1.86 from MYR1.71, 8% upside with c.6% FY24F yield. UOA Development’s 2Q23 results are in line. 1H23 property sales totalled MYR303m, as sales picked up in 2Q. While the launch of Duo Tower will be in 4Q, that of Bamboo Hills Residence has been postponed to 1Q24 as UOAD is changing some elements of the property plan while also awaiting some approvals. Its net cash pile of MYR2.3bn should support consistent dividend payouts. We raise our TP to reflect better market sentiment ahead, on the end of the political overhang post state elections.

• 2Q23 results. Revenue for the quarter was mainly underpinned by the billings from Laurel Residence and Aster Hill, as well as the remaining units in The Goodwood Residence and United Point Residence. Meanwhile, its other income grew 16% QoQ as occupancy rates of a few retail assets (such as United Point and South Link) as well as the hospitality assets picked up further. Net cash also inched up to MYR2.3bn from MYR2.2bn in 1Q23, providing cash flow flexibility for its upcoming office project in Bangsar South.

• Stronger sales in 2Q23. 2Q23 property sales amounted to MYR178.9m, vs MYR124.1m in 1Q23. 1H23 sales of MYR303m largely came from The Goodwood Residence (MYR112.1m), Aster Hill (MYR106.6m) and Laurel Residence (MYR54.7m). The take-up rate for Aster Hill increased more substantially in 2Q, as the project was launched in Feb 2023. The project is now 28%-sold (for Block A), compared to only 8% in the previous quarter, while Laurel Residence is 55%-sold vs 49% in 1Q23. The Goodwood Residence units are now only 5% unsold.

• Slight delay in Bamboo Hills Residence launch. The highly anticipated launch of Bamboo Hills Residence has been pushed back to early 2024 from 4Q23, as management is revising some elements of the project’s design and also waiting for the approvals to launch. Meanwhile, Duo Tower, a strata office in Bangsar South with a GDV of MYR1.3bn, is slated to be launched in 4Q23 – its ASP is estimated at MYR1.2-1.3k psf (net) and about one-third of the floor space will be put up for sale as small strata office units. The remainder will be kept as investment property.

• No change to our FY23-25F earnings. In July, in view of its solid cash pile, the company announced a special DPS of 20 sen, which surprised the market. Management clarified that the usual ordinary dividend will still depend on the company’s overall performance by year-end (FY22 DPS: 10 sen). As such, we maintain our DPS forecast of 20 sen +10 sen for FY23. Unbilled sales rose to MYR285.2m vs MYR226.3m as at 1Q23.

• Valuations. Our TP is based on a 40% discount to RNAV with a 2% ESG discount applied, given UOAD’s new ESG score of 2.9 out of 4.

Source: RHB Securities Research - 24 Aug 2023