• Maintain NEUTRAL, new TP of MYR2.02 from MYR1.86, 1% upside with 5% FY24F yield. UOA Development’s 1Q24 results fell below estimates. Although 1Q24 property sales only amounted to MYR121m, we expect this to improve in 2H, given the overwhelming response to Bamboo Hills Residences. Meanwhile, its earnings will likely pick up, with the completion of Laurel Residence by the end of the year. We raise our TP (based on a 35% discount to RNAV, from 40%) to be in line with the overall sector re-rating.

• 1Q24 results. 1Q24 revenue fell QoQ and YoY, as UOAD’s new projects are mainly at the initial stage of construction, while inventory sales were also lower. Ongoing projects such as Laurel Residence and Aster Hill were the key revenue contributors. The sequential drop in EBIT was largely due to a few one-off items including a MYR39.4m fair value gain arising from Bamboo Hills Residences and the sale of an old sales gallery, as well as the reversal of impairment losses on a non-financial asset (related to Komune Living in Bangsar South) in 4Q23. The company has a net cash pile of MYR1.85bn.

• Expect property sales to be stronger in upcoming quarters. 1Q24 property sales were at MYR120.9m vs MYR365.4m in 4Q23. Note: 4Q23 property sales were very much boosted by the sale of the company’s previous sales gallery at Bangsar South – this is to be redeveloped into a low-rise medical suite worth MYR237m. Projects that contributed to property sales in 1Q24 include Aster Hill (MYR76.6m) and Laurel Residence (MYR10.9m), while Duo Tower – launched in March – recorded a maiden sales contribution of MYR10.9m during the quarter. The take-up rates for UOAD’s existing projects only picked up marginally. Aster Hill is now 37% sold (vs 36% in 4Q23), and Laurel Residence is 71% sold (vs 70% in 4Q23).

• Robust demand for Bamboo Hills Residences. The preview of this project was held over the last two months, and we gather that the first block is almost fully sold (excluding bumiputera units), and UOAD has just released the second block, which has had a similarly encouraging response. Given the overwhelming demand for the first block, the ASP for second block has been raised by 7-8% from about MYR650 psf (the rate for the first block). Buyers should start signing their sale & purchase agreements when UOAD obtains the advertising permit and developer’s license (APDL) for the project in June- July. Hence, we expect its property sales to be much stronger in 2H, as the two residential blocks should have a GDV of about MYR900m.

• Forecast. We maintain our earnings forecasts as we expect earnings in 2H to be stronger due to sales contributions from Bamboo Hills Residences, while Laurel Residence may be handed over at the end of the year. Unbilled sales inched up slightly to MYR311.7m vs MYR308.4m as at 4Q23.

Source: RHB Research - 29 May 2024