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UOA Development shares extend rebound

KUALA LUMPUR: Shares in UOA Development Bhd have begun to recover after slumping up to 55% from its initial public offering (IPO) price.

Investor interest has been gaining momentum in the last week as heavy trade buoyed the stock, which saw its volume peak at 39.9 million shares last Thursday, Oct 13.

UOA Development re-emerged on the top actives list on Thursday, and was the fifth most actively traded stock with 35.43 million shares changing hands. It added 19 sen or 12.6% to close at RM1.70 on Thursday.

"The stock sank due to the broader decline in the equity market. Property stocks tend to be hit the hardest as they have a higher beta and are more sensitive [to changes in the market]," an analyst with Affin Investment Bank told The Edge Financial Daily.

The stock, which listed on the Main Market on June 8, had plunged to a low of RM1.16 at end-September following months of steady decline. While the stock has since rebounded 46.6% from its lows, its current price is still 34.6% lower than its IPO price of RM2.60.

Affin Investment has maintained its "buy" call and target price of RM2.07 for the stock, a 20% discount to its revalued net asset value (RNAV).

"UOA Development may have been harder hit (relative to its peers in the industry) as there is a common misconception that the company has a heavy reliance on its Bangsar South development," said the analyst.

According to the research house, the company currently has six projects under development across Kepong, Bangsar South, Segambut, Setapak and the KLCC area.

"Bangsar South does provide strong support to its earnings and sales though the company has several standalone projects too," said the analyst.

Together, these projects have an estimated gross development value of RM2.07 billion. The company recently entered into a sale and purchase agreement to acquire a 9.8-acre (3.97ha) parcel of land in Kepong for RM72.8 million.

"We are neutral on the proposed acquisition as we think the acquisition price of RM170 psf is reasonable, and we believe there is a ready demand for new residential properties in the Kepong locality," said Affin in a report issued earlier this week.

The company had gross cash and equivalents of RM368.37 million, with minimal borrowings of RM20.88 million as at end-June.

Director David Khor told the media that the recent purchase was part of five or six projects planned for next year.

The company recorded RM533 million in sales for 1HFY11, as it saw a higher contribution from its residential segment than its commercial segment. Contribution from its residential segment rose to 59% from 25%.

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