UOA eyes RM4b new property sales

KUALA LUMPUR (Sept 3): UOA Development Bhd says its combined new property sales for 2012 and 2013 may surpass the RM4 billion mark, helped by substantial real estate launches from the property company during the two-year period.

In emailed replies to enquiries by The Edge Financial Daily, UOA said after achieving record new property sales of RM900.2 million in the first half of 2012, the group is targeting RM3.5 billion worth of sales from the second half of this year to end-2013.

“We expect UOA’s earnings and dividends to enjoy good growth over the next couple of years on the back of record sales of RM900 million for the first half of FY12 which has substantially surpassed the full year sales of RM848 million in 2011.

“Total unbilled sales is in excess of RM800 million and with the expected strong take up of the coming development projects intended for launch, total unbilled sales is expected to rise,” UOA said.

For 2012 and 2013, the developer said its pipeline of launches within the Klang Valley have a combined value of RM3.45 billion. These include the RM1.5 billion Kencana Subang, RM500 million [email protected] Kiara Hills and RM600 million Desa Green at Taman Desa.

Within the Bangsar South enclave, UOA said it is undertaking two projects with a collective value of RM850 million. According to UOA, its existing and upcoming real estate projects have a collective gross development value (GDV) of over RM14 billion which will be realised within the next five to seven years.

The company said it will continue to focus on residential and commercial property projects within Greater Kuala Lumpur/Klang Valley where it is eyeing potential land acquisitions for future development jobs.

The Greater Kuala Lumpur/Klang Valley National Key Economic Areas (NKEA) is one of the 12 NKEAs under Malaysia’s Economic Transformation Programme.

Analysts are optimistic about UOA’s prospects. CIMB Investment Bank Research head Terence Wong said UOA is the research house’s top pick in the property sector and potential re-rating catalysts for the company include the group’s continued strong sales apart from sustainable earnings and dividend growth.

In a note, Wong highlighted the growth in UOA’s GDV from RM11.1 billion when the company was listed in June last year to RM15.7 billion now. According to Wong, the increase is due to the developer’s new landbank and higher property sales value for existing tracts.

“Although there were no major surprises from the briefing save for the higher GDV values for many of its future projects, we are positive on management’s more proactive stance in engaging the investment community.

“This engagement will go far in explaining why UOA has been so profitable and why we believe its earnings and high dividends are sustainable over the next two to three years.

The group has a unique business model that allows it to enjoy margins nearly double the industry average,” Wong wrote in a note issued following UOA’s recent analysts’ briefing.

He said the UOA’s higher GDV has prompted CIMB to increase the developer’s revised net asset value from RM2.72 to RM2.81, hence, a higher target price of RM2.25 from RM2.18 previously. Wong has a “trading buy” call for the stock.

UOA’s latest financials have improved, helped by a substantial increase in new property sales and fair value gains from its investment properties, according to notes accompanying its quarterly results.

Its net profit rose 76% to RM104.97 million in the second quarter ended June 30 from RM59.79 million a year earlier, while revenue climbed 14% to RM197.46 million from RM173.33 million.

Cumulative first half net profit however declined 23% to RM145.92 million from RM189.83 million a year earlier while revenue was up 8% to RM345.54 million from RM319.07 million.

The company has a strong balance sheet with a net cash of some RM120 million as at June 30 based on the company’s cash of RM136.94 million and debt obligations of RM16.93 million.

Meanwhile, RHB Research Institute’s analyst Loong Kok Wen said the anticipated collective progressive cash outflow of some RM600 million in UOA over the next three years is expected to be mitigated by cash inflow from the proposed en bloc sales of two office buildings in Bangsar South.

According UOA’s exchange filings, the company is selling a 14-storey building to DKLS Industries Bhd for RM93.8 million, apart from a 13-storey entity to Lembaga Tabung Haji.RHB’s Loong said based on UOA’s operating cash flow, the research firm foresees “little risk” in the developer’s ability to sustain its dividend payouts.

“Moreover, the company has plenty of room for gearing. Opportunities in Iskandar [Malaysia] have been evaluated for future potential landbanking exercise,” Loong wrote in a note last week.

UOA had rewarded shareholders with a first and final single-tier dividend of 10 sen a share in FY11, translating into a total payout of RM119.59 million or 31% of its net profit during the year, according to the company’s latest annual report and exchange filings.

The dividend translates into a yield of 5.6% based on UOA shares closing price of RM1.77 last Thursday. The stock had risen 29% this year, outperforming the FBM KLCI’s 8% advance.

UOA was listed on Bursa Malaysia in June last year at an issue price of RM2.52 a share. The company’s latest reported net assets per share stood at RM1.63.

This article appeared in The Edge Financial Daily on Sept 3, 2012.

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