KEY INVESTMENT HIGHLIGHTS

• 9MFY24 earnings within expectations
• Stable earnings growth
• Positive new sales prospect
• Earnings forecast maintained
• Maintain BUY with an unchanged TP of RM2.06

9MFY24 earnings within expectations. UOA Development's 9MFY24 core net income of RM158.8m came in within expectations, making up 74% and 70% of our and consensus full year estimates respectively.

Stable earnings growth. Sequentially, 3QFY24 revenue was higher (+42.5%qoq) due to higher revenue recognition from on-going projects.

Nevertheless, core net income was lower at RM49.7m (-17%qoq) despite higher revenue mainly due to higher cost of sales and higher tax rate.

Tax rate increased to 39% in 3QFY24 from 36% in 2QFY24 due to certain expenditure are not tax deductible. On yearly basis, 3QFY24 core net income was higher (+10.6%yoy), bringing 9MFY24 cumulative core net income higher at RM158.8m (+4.5%yoy). The higher earnings were supported by earnings recognition from ongoing projects namely Aster Hill, Laurel Residence and medical centre in Bangsar South. The higher earnings were also driven by higher hospitality income and rental income from its investment assets.

Positive new sales prospect. New property sales surged to RM526.5m in 3QFY24 from RM142m in 2QFY24 due to sales recognition from Bamboo Hills Residence (GDV: RM1.4b) at Jalan Ipoh which were launched in July 2024. That brought total new sales to RM790m in 9MFY24 which contributed mainly by Bamboo Hills Residence at 58% and Aster Hill at 30%. Looking forward, new sales momentum should sustain by Bamboo Hills Residence due to good location of the project and affordable selling price of RM400k-RM600k. Hence, we expect stronger new sales in FY24. On the other hand, unbilled sales stood increased to RM524.6m in 3QFY24 from RM368.7m in 2QFY24, lifted by medical centre project in Bangsar South.

Maintain BUY with unchanged TP of RM2.06. We maintain our earnings forecast for FY24/25/26F. We also maintain our TP for UOA Development at RM2.06, based on 25% discount to RNAV. We remain upbeat on new sales prospect for UOA Development which will support earnings growth in the medium term. Besides, the recurring income from its investment properties and hospitality assets will further support earnings growth. Meanwhile, dividend yield is attractive at 5.4%. Hence, we maintain our BUY call on UOA Development.

Source: MIDF Research - 21 Nov 2024