UEMS: Property Developer’s Q3 Earnings In Line, Rating Adjusted to Neutral Amidst Stronger Revenue Growth

A prominent property developer reported its third-quarter FY25 net profit of RM18.9 million, reflecting a 20.3% year-on-year and 15.7% quarter-on-quarter decline. This result was in line with TA SECURITIES’ estimates but fell below the market consensus. Year-to-date, the Group’s nine-month FY25 net profit stood at RM64.2 million, marking a 28.1% year-on-year increase and accounting for approximately 76% of TA SECURITIES’ full-year estimates and 64% of consensus projections.

Performance Drivers and Moderating Factors

The nine-month FY25 period saw revenue surge by 60% year-on-year to RM1.3 billion, primarily driven by robust property development revenue of RM931 million. This growth was underpinned by continuous progress across key projects in both the Central and Southern regions. These included developments such as The MINH in Mont Kiara, The Connaught One in Cheras, and Residensi ZIG in Kiara Bay in the Central region, alongside Aspira Hills, Aspira LakeHomes, and DiReka Square in the Southern region, all of which delivered strong sales.

However, the Group’s net profit in the third quarter was tempered by higher finance costs and income tax expenses. Nevertheless, improved operating margins and contributions from joint ventures provided a partial offset to these moderating factors, helping to cushion the impact on profitability.

Sales Performance and Future Pipeline

The developer successfully surpassed its FY25 pre-sales target of RM1.05 billion, achieving RM1.08 billion in 9MFY25. Its unbilled sales currently stand at approximately RM2.1 billion, expected to be recognized over the next 36 months, providing significant revenue visibility for the coming years.

In terms of project launches, the Group has introduced approximately RM1.8 billion in Gross Development Value (GDV) in 9MFY25, representing 88% of its RM2 billion full-year target. Notable launches included Allegro in Symphony Hills, Aspira Hills Phases 2A and 3A, and the international launch of One Oval in Perth catering to Malaysian and Singaporean purchasers. An additional RM462 million in pipeline launches is slated for the fourth quarter of FY25, indicating continued development activity.

Analyst’s View and Recommendation

Given the recent price softness observed in the stock, TA SECURITIES has adjusted its recommendation from ‘Underperform’ to Neutral. Concurrently, the 12-month target price has been revised downwards to RM0.60 from the previous RM0.70. This new target price is pegged to approximately 0.4 times its book value, aligning with its five-year average discount. The investment bank maintained its earnings estimates for the company.