• Maintain NEUTRAL and TP of MYR2.02, 8% upside with c.5% FY24F yield. UOA Development’s 2Q24 results are below estimates. 1Q24 property sales only reached MYR121m, but we expect this performance to pick up strongly in 2H, given the overwhelming response to Bamboo Hills Residences. Both Bamboo Hills and Laurel Residence are also expected to drive earnings in 2H. We make no changes to our earnings forecasts.

• 2Q24 results review. The sequential growth in revenue was mainly driven by higher progressive billings from all the ongoing projects, such as Aster Hill and Laurel Residence, as well as more inventory sales (from The Goodwood Residence, Sentul Point and United Point Residence). The company’s net cash position is unchanged, at MYR1.85bn.

• Property sales picked up in 2Q24. 2Q24 property sales hit MYR142.4m vs MYR120.9m in 1Q24. Of the total sales of MYR263.3m in 1H24, Aster Hill contributed MYR180.8m, while Duo Tower and Laurel Residence raked in MYR40.9m and MYR20.3m. Duo Tower, launched in 1Q24, has had a slow take-up – largely due to the product type (strata office units), as buyers or office users typically prefer to see finished/nearly completed units before buying. Other projects such as Laurel Residence and Aster Hill are already 72%- and 51%-sold, from 71% and 37% in the previous quarter.

• Bamboo Hills to drive sales in 2H24. Bamboo Hills Residences (total GDV: MYR1.4bn) was officially launched in July. We gather that the first two blocks have already achieved a booking rate of >50%, and buyers have started signing their sale and purchase agreements. Given the positive response, management may release the third block in early 4Q24, and will likely see ASP going at about MYR650-700 psf, from MYR600-650 psf for the first two blocks.

• Forecast. We maintain our earnings forecasts as we expect earnings and property sales to be much stronger in 2H24, driven mainly by the contribution from unit sales in Bamboo Hills. Meanwhile, Laurel Residence will likely be completed by the end of the year. UOAD’s unbilled sales increased to MYR368.7m from MYR311.7m as at 1Q24.

• Valuations. Our TP is based on a 35% discount to RNAV with a 2% ESG discount applied, as UOAD’s ESG rating is one notch below the country median. From our latest discussion with management, the company may potentially venture out of the Klang Valley to pursue better growth opportunities. Given its track record of selecting locations and project execution, such plans may be well-received if they materialise.

Source: RHB Research - 28 Aug 2024