UOADEV: Cost Efficiencies Bolster Performance, Analyst Sets New Target Price

UOA Development’s financial performance for the first half of FY25 largely met expectations, with robust core net income driven primarily by significant cost efficiencies in the second quarter. This strong operational execution has prompted TA Securities to maintain a positive outlook, affirming a BUY recommendation and establishing a new target price.

Performance Review

In 2QFY25, core net income rose 12.9% quarter-on-quarter to RM90.6 million. This increase was notable, especially as it occurred despite a 14.4% quarter-on-quarter decline in topline revenue. On a year-on-year basis, 2QFY25 core net income saw a substantial jump of 51.4%. Cumulatively, 1HFY25 core net income reached RM170.5 million, marking a 56.2% year-on-year increase. The significant improvement in profitability was largely attributed to substantial cost savings recognized from the completion of Laurel Residence. These savings widened the operating profit margin to an impressive 82.9% in 2QFY25, a considerable increase from 65.9% in 1QFY25. Additionally, a lower tax rate of 15% in 2QFY25, down from 19.2% in 1QFY25, further contributed to the enhanced earnings.

Sales and Operational Highlights

The higher earnings were also supported by progressive revenue recognition from key ongoing property projects, including Bamboo Hills Residences, Aster Hill, a medical centre in Bangsar South, and Laurel Residence. Furthermore, increased income from the company’s investment properties and hospitality assets played a role in the improved financial results. However, new property sales experienced a softening trend in 2QFY25, recording RM148 million compared to RM265 million in 1QFY25. This brought total new sales for 1HFY25 to RM413 million.

Future Outlook and Recommendation

Looking ahead, new sales are anticipated to remain robust in 2HFY25, primarily supported by Bamboo Hills Residence, which contributed 65% of total new sales in 1HFY25. The company’s maiden high-rise project in Johor, boasting a Gross Development Value (GDV) of RM1.2 billion, is expected to launch by end-FY25 or FY26, poised to sustain new sales momentum and act as a significant catalyst beyond FY26. Unbilled sales remained steady at RM888 million in 2QFY25, providing healthy earnings visibility for approximately 1.6 years. The company’s earnings prospects are expected to remain stable, underpinned by ongoing contributions from Bamboo Hills Residence and Aster Hill. With an attractive dividend yield of 5.6% and a healthy net cash balance sheet, the investment bank reiterates its positive stance.

TA Securities maintains its BUY recommendation for UOA Development. The target price has been set at RM0.25, representing a potential upside of 25.0% from the last traded price of RM0.20.