• Maintain NEUTRAL and TP of MYR2.02, 10% upside with c.5% FY24F yield. UOA Development’s 3Q24 results are below expectations, as its sales and billings from Bamboo Hills Residences have yet to be recognised. We expect 4Q24 numbers to pick up, driven by the potential completion of Laurel Residence as well as encouraging sales from Bamboo Hills. 9M24 property sales already hit MYR790m, and we believe the company will likely end the year with about MYR850m in sales.

• 3Q24 results. Ongoing projects such as Laurel Residence and Aster Hill continue to underpin revenue and earnings for the quarter. However, despite its launch in July, revenue recognition from Bamboo Hills Residences was absent due to the delay in budgeting development costs. Meanwhile, other income grew 4.2% QoQ, due to improved occupancy and rental rates from office and retail assets, as well as higher income contributions from its hospitality assets. The company’s net cash position stood at MYR1.78bn.

• Property sales spiked up in 3Q24. 3Q24 property sales amounted to MYR526.2m, compared with MYR142.4m in 2Q24. As expected, Bamboo Hills Residences was the major sales contributor in 3Q24. Of UOAD’s total sales of MYR789.5m in 9M24, the project contributed MYR454.4m,followed by MYR237.8m from Aster Hill, MYR43m from Duo Tower and MYR24.9m from Laurel Residence.As of now, all three projects – Bamboo Hills, Aster Hill and Laurel Residences – are already close to being 70% sold. As such, the available units for sale are minimal, pending the release of its bumiputeraquota units.

• Pipeline projects for 2025. The last block of Bamboo Hills Residences (Block C) will be launched in early 2025, and will likely see higher ASP from the current MYR700 psf (initial ASP was MYR650 psf). Apart from this, the company also plans to develop an office tower in UOA Business Park Phase 2, which has a GDV of MYR130m. The office block is intended to generate rental income and/or be up for sale on an en bloc basis.

• Forecast. We maintain our earnings forecasts as we expect 4Q24 numbers to be much stronger, driven mainly by the contribution from Bamboo Hills and the completion of Laurel Residence. Given the successful sales in Bamboo Hills, the company’s unbilled sales rose to MYR524.6m from MYR368.7m in 2Q24.

• Valuations. Our TP is based on a 35% discount to RNAV with a 2% ESG discount incorporated. The company’s large cash pile would come in handy for more landbanking activities, and we understand that management is now exploring growth opportunities outside the Klang Valley region.

Source: RHB Securities Research - 21 Nov 2024