UOA to launch four new projects this year

UOA Development Bhd
(Jan 15, RM2.10)
Maintain buy with a higher target price (TP) of RM2.57: Given the soft property market environment, UOA Development Bhd is planning only four launches in 2016, with an estimated gross development value (GDV) of RM3.5 billion. Despite fewer launches, we believe UOA’s earnings will be supported by its existing projects. As at Sept 30, 2015, UOA’s unbilled sales stood at a healthy RM1.5 billion.

After the successful development of Bangsar South, we believe its Jalan Ipoh project will be the next key catalyst for UOA. The proposed mixed-use development project, which will be UOA’s next anchor project, will be spread over 28 acres (11.33ha) comprising condominiums, offices, a retail mall and hotel with an estimated GDV of RM6 billion.

It is worth noting that 24% of its market cap is net cash. Stripping this out, the stock is trading at just 7.5 times price-earnings ratio in 2016 (estimate).

We maintain “buy” on UOA with a revised TP of RM2.57 (from RM2.43), as we have added Desa Sentul into our revised net asset value (RNAV) and higher GDV for the Jalan Ipoh development. This is based on a 30% discount to RNAV.

We continue to like UOA for its strong management, proven track record, good product branding and strong cash position. As such, we maintain our “buy” recommendation on UOA. Risks to our call would be a sharper-than-expected slowdown in the Klang Valley property market and high-end residential demand, as well as further delays in the development of its Jalan Ipoh project. 

This article first appeared in The Edge Financial Daily, Jan 18, 2016. Tap here to subscribe for your personal copy.