UOA Development's first venture outside Klang Valley prompts upgrade at RHB Research

• On April 30, UOA Development announced it has signed an agreement to jointly develop the land into serviced apartments. UOA Development and its subsidiary together are expected to hold 75% in the joint venture.

KUALA LUMPUR (May 9): UOA Development Bhd's (KL:UOADEV) first-ever venture outside Klang Valley will raise its net asset value and share price even as the project could come with a lower margin, said RHB Research.

While the company has yet to determine project details of the one-acre development in Johor Bahru, the incremental value from the project is enough to prompt RHB Research to upgrade UOA Development to ‘buy’ and lift its target price to RM1.93.

“We are positive on UOA Development’s recent land acquisition at Johor Bahru city centre,” RHB Research said.

On April 30, UOA Development announced it has signed an agreement to jointly develop the land into serviced apartments. UOA Development and its subsidiary together are expected to hold 75% in the joint venture.

The company did not provide project details, though RHB Research estimates the project could fetch a gross development value of up to RM650 million with average selling prices of RM1,500 per square foot in line with the current market prices for new launches.

Development margin may be slightly lower, given the company’s new presence in the area, compared to its existing projects in the Klang Valley, where land costs are much lower, RHB Research said.

The project site is near the Bukit Chagar station of the Johor Bahru–Singapore Rapid Transit System Link to be completed by the end of 2026, which has generally boosted land prices in the surrounding area, the research house noted.

“Nevertheless, we are positive with management’s move to venture outside of the Klang Valley region to widen its presence and raise property sales over the medium term,” RHB Research added.

There are now three 'buy' and two 'hold' calls out of five research houses covering UOA Development. The average target price is RM1.92, according to Bloomberg, suggesting a potential return of up to 8.5% in the next 12 months from the current price.

At the last price of RM1.77, UOA Development has a market capitalisation of RM4.65 billion. The counter has risen about 1% year-to-date.

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