UOADEV: Property Developer Exceeds Expectations on Cost Savings, Target Price Raised

A leading property developer has reported a strong financial performance for the second quarter of 2025, significantly exceeding market expectations. This positive outcome was primarily driven by substantial cost efficiencies. In response to the robust results and a promising outlook, an investment bank has maintained its “Buy” recommendation for the company, raising its target price.

Performance Review

The company’s 2Q25 results surpassed forecasts, with earnings largely attributed to cost savings realized from the completion of the Laurel Residence project earlier this year. This strategic efficiency translated into a notable expansion of the Earnings Before Interest and Taxes (EBIT) margin, which widened to 75% for the quarter, a significant increase from 53% in 1Q25. The company also maintained a solid financial footing with a net cash position of MYR1.91 billion.

Sales Trends and Growth Pipeline

Despite the strong earnings, property sales experienced a sequential moderation in 2Q25, totaling MYR148 million compared to MYR265 million in 1Q25. For the first half of 2025, total sales reached MYR413 million. Key contributors included Bamboo Hills Residences (MYR267.3 million), Laurel Residence (MYR53.6 million), Aster Hill (MYR42.1 million), and Duo Tower (MYR39.9 million). Take-up rates for Bamboo Hills (Blocks A, B, and C) stood at 59%, with Aster Hill seeing a slight improvement to 69% from the previous quarter.

Looking ahead, the company is set to boost sales with highly anticipated project launches. Its maiden Johor Bahru (JB) project is expected to launch by year-end, pending the necessary advertising permit and developer’s license. This project is strategically located near the Rapid Transit System (RTS) station, with plans for a link bridge to the transport terminal. Early preview interest has been encouraging, with an indicative average selling price (ASP) of c.MYR1,200-1,250 psf. Additionally, UOA Business Park Phase 2 office (GDV: MYR130 million), an investment property, is scheduled for launch this year.

Future Outlook and Recommendation

In view of the strong 1H25 results and anticipated recurring income streams, along with the strategic timing of the JB project launch, the investment bank has revised its earnings forecasts for FY25-27F upwards by 14-15%, signaling potential dividend upside. Unbilled sales remained steady at MYR888.1 million. The bank has raised its target price to MYR2.08 (from MYR1.93), representing an 18% upside, based on a 30% discount to RNAV (adjusted from 35%) and incorporating a 2% ESG discount. The “Buy” recommendation has been maintained, reflecting a positive outlook for the company.