CIMB Research initiates coverage on UOA Devt, TP RM3.25

KUALA LUMPUR: CIMB Equities Research has initiated coverage on UOA Development Bhd with a target price of RM3.25 based on 13.1 times FY12 P/E or a 10% discount to its target market P/E of 14.5 times.

“UOA Development’s poor share price performance since its listing gives investors a chance to accumulate the stock on the cheap. Investors’ realisation of the strong core earnings growth in FY11-13 could spark a re-rating, along with robust sales or more land banking,” it said on Tuesday, July 19.

CIMB Research said what sets UOA Development apart from its rivals is its wide gross margin of around 50%, which puts it well ahead of many sizeable established developers and will help this highly profitable developer to nearly triple its core net profit in FY12.

“In view of its relatively small landbank but consistent track record for landbanking and earnings expansion, we are valuing it on P/E basis, similar to other quick turnaround companies,” it said.

The research house said UOA Development has around 100 acres of undeveloped landbank with GDV of RM11bn. Its flagship project is the 60-acre Bangsar South project in Kuala Lumpur which has a GDV of over RM8bn.

“Besides various undeveloped residential and commercial components of Bangsar South worth RM6.1bn, UOA Development has another 10 projects with GDV worth nearly RM3bn which will be launched over the next 2-3 years. The group enjoys wide margins ranging from 35% to 60% as it prices its PROPERTIES [] at a premium and captures CONSTRUCTION [] margins internally,” it said.