En bloc sales boost for UOA
It may become major earnings contributor developer
PETALING JAYA: En bloc sales, if transacted, may become a major contributor to property developer UOA Development Bhd’s earnings in the coming year.
Analysts said following the company’s release of the third quarter ended Sept 30 financial results that the full-year sales target of RM1bil has been exceeded and that sales for the current financial year should hit RM1.5bil to RM2bil.
While CIMB Investment Bank Bhd research head Terence Wong believes there could be another en bloc office space sale before yearend, analysts at Kenanga Investment Bank Bhd expects a potential earnings upgrade if the group were to chalk up more of such sales.
Similar sentiments from both research houses suggest en bloc selling could be UOA’s business strategy moving forward.
Wong said collective sale to transact before year-end would likely be for one of UOA’s projects that contributed the most to its current revenue.
“We don’t know who the buyer is for the en bloc (sale) but it should be of the The Horizon Boutique Office Towers,” he told StarBiz.
Wong added that en bloc sales was an important contributor to the group’s mainstay in residential and office space developments.
For its first nine-month period, UOA Development recorded RM1.24bil in new sales, of which RM336mil or 27% came from the sale of en bloc office buildings in The Horizon.
Wond said these included two buildings sold to Lembaga Tabung Haji in July while other major contributors to new sales include the medium-cost Le Yuan Residence in Sri Petaling which made RM278mil or 22% of its total sales, strata-titled office space at Vertical in Bangsar South for RM240mil or 19% and office space at Kencana Square in Glenmarie for RM114mil or 9%.
Kenanga Investment analysts said UOA’s quarter-on-quarter core earnings for the third quarter rose 51% to RM111mil as the group completed sales of blocks of Horizon Office to Lembaga Tabung Haji for RM204mil.
“As a result, the group’s cash pile grew by 148% to RM340mil and its net cash positioned improved further to 0.15 times,” they said.
Wong also said there were no changes to the research house’s earnings forecasts, “trading buy” call and target basis of 20% discount to revalued net asset value. While there were no dividend declared as expected, CIMB continues to forecast a dividend per share of 12 sen for the current financial year.
“UOA remains our top pick in the property sector for its attractive valuations. The stock is trading at price-to-earnings ratios of six to seven times for financial year 2012 to 2014 and offers 7% to 8% dividend yield, by far the highest in the sector,” he said in a report.
Wong said the consensus 2012 net profit forecast has also been revised up significantly and CIMB Research was only 4% above consensus compared to 17% in August. “For 2013 and 2014 net profit, we were previously 16% and 42% higher than consensus, but that has also narrowed to only 2% and 5% respectively.”
Despite the positive outlook, he held back from rating UOA “outperform” due to election risks.
On this front, Kenanga Research stated that potential downside for UOA were sector risks, including negative policies and disappointing dividends.
Kenanga Investment analysts noted UOA’s key launches for the next 12 to 18 months would amount to RM3.1bil.
Among the upcoming projects are Kencana Square@Glenmarie, Scenaria or Kiara IV, Desa III, Desa II Phase 1, Desa Green and Kerinchi SoHo.
They said UOA’s fourth quarter this financial year would see sales from Desa Green, as its first two blocks were almost fully booked, and Scenaria which was opened for preview this weekend.