Posted on July 12, 2012, Thursday
KUCHING: UOA Development Bhd’s (UOA) projects are expected to buck the bearish trend while the anticipation of its continuous strong dividend payouts will lend strength to the stock.
To recap, Lembaga Tabung Haji had accepted the offer from UOA to purchase two office blocks (Tower 6 and 2A) in Horizon (Phase 2) at Bangsar South City.
Both parties were not obliged to complete the purchase unless both towers’ sales purchase agreements (SPAs) were completed simultaneously.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), after the due diligence process was completed, Tower 6 would be sold at RM102 million or RM700 per square foot (psf).
“We expect a similar pricing as well for Tower 2A as they are identical.
“The expected sale completion date is by end-2012,” said Kenanga Research.
Commenting on the sales, the research house said the price of RM700 psf was slightly lower than the earlier en bloc sale of Horizon (Phase 2) office to DKLS with RM710 psf.
However, the slight discount was warranted as the group was selling two towers at one go.
The research firm expected RM20.9 million in fair value gains, subject to a five per cent Real Property Gains Tax (RPGT) to be booked in the profit and loss (P&L).
Kenanga Research was positive on the en bloc sale as it was expected to help lock in substantial sales, a larger cash pile and an immediate earnings contribution.
“Taking into account the year’s other en-bloc deals and first quarter 2012 (1Q12) balance sheet, the net cash level of 0.03 times will improve to 0.17 times, this implies a sizeable cash pile of RM340 million, which will be handy for significant landbanking,” added the research firm.
UOA would had achieved three offices en bloc sales this year amounting to RM298 million.
The total sales value to date is RM0.7 billion, inclusive of 1Q12 sales of RM444 million, against the research firm’s financial year 2012 estimates (FY12E) sales target of RM0.9 billion.
“This is commendable performance given the lukewarm property sector dynamics, demonstrating UOA’s ability to set itself apart from the pack,” added Kenanga Research.
Assuming the launch of new projects (Glenmarie gross development value (GDV) of RM1 billion, Kiara IV GDV of RM0.5 billion) by 2H12, the research firm is confident that the group would meet its estimates.
“UOA owns another three more Horizon Phase 2 office blocks. It will be interesting to see another en-bloc sale done this year, where the group then would exceed our targeted FY12E sales of RM0.9 billion,” said the research firm.
On the financial front, Kenanga Research said that it raised the FY12E net profit by seven per cent to RM308 million to reflect fair value gains.
“Consequently, we have also raised our FY12E net dividend per share by four per cent to 13.4sen on the assumption of some portions of the gains will be distributed back to shareholders.
“We may raise our estimates again pending our upcoming company visit,” concluded the research firm as it pegged a fair value of RM1.84 per share for UOA.
