New project supported 1Q22 property sales
? 1QFY22 core earnings came in above our expectations on lower-than-expected operating costs, down 34% yoy on weaker revenue.
? 1Q22 new property sales stood higher yoy at RM102.9m, largely driven by its
Laurel Residence project launched in mid-Mar 2022.
? Downgrade to Reduce in view of its rich P/BV valuation vs. peers, and
weaker FY22-24F earnings outlook.
Key results highlights
UOA Development’s (UOAD) 1QFY22 core net profit (excluding forex movement) was
above our forecast at 35% of our full-year estimate due to lower-than-expected operating
cost but below Bloomberg consensus’ at 15%. 1Q22 core earnings declined 34% yoy on
weaker revenue (-61% yoy), due to: (i) lower revenue recognition from existing projects
as there were not many launches in FY21; and (ii) strong 1Q21 core net profit, bumped
up by higher progressive recognition from The Goodwood Residence. 1Q22 gross margin
was 7.5% pts higher yoy, mainly lifted by sale of completed stocks. Qoq, 1Q22 core net
profit contracted 64% due to lower progressive recognition from the Goodwood
Residence and lower sales of inventories (mainly United Point Residence and Sentul
Point Suite Apartments) vs. 4Q21. No dividend was declared for 1QFY22, as expected.
1Q22 new property sales supported by Laurel Residence launch
1Q22 new property sales came in higher at RM102.9m vs. RM80.8m in 1Q21, largely
buoyed by the launch of Laurel Residence in 1Q22. The key contributors besides Laurel
Residence (RM68.4m) were Goodwood Residence (RM13.1m), United Point Residence
(RM7.7m), and others (RM13.7m). Total unbilled sales as at end-Mar 2022 were lower at
RM122.9m vs. RM225m as at end-Mar 2021.
More launches in 2H22
UOAD plans to launch projects worth up to c.RM1.05bn in gross development value
(GDV) in FY22F, namely: (i) Laurel Residence, Bangsar South (RM550m GDV), ii) Desa
3, Taman Desa (RM18m GDV), and iii) Sri Petaling Phase 2 (RM480m GDV). We gather
that UOAD launched Block B of Laurel Residence (c.RM300m GDV out of RM550m total
project GDV) in mid-Mar, and that the rest of this project and the other projects would be
launched in 2H22. We expect FY22F new sales to be higher than FY21’s, given the more
aggressive launches lined up for FY22F.
Downgrade to Reduce
We raise our FY22-24F EPS estimates by 20-37% on lower operating cost assumptions.
Our TP is unchanged at RM1.68, still based on a FY23F P/BV of 0.7x (its 10-year mean
P/BV). We downgrade UOAD to Reduce in view of its: (i) weaker FY22-24F earnings vs.
FY21 on depleting unbilled sales, and (ii) share price outperformance vs. the FBMKLCI
index of c.14% YTD despite its weaker earnings profile for FY22-24F vs. FY21, and (iii)
current higher FY23F P/BV valuation of 0.8x vs. peers’ average of 0.45x.