KUALA LUMPUR: Kenanga Research has toned down its FY17E sales target for UOA Development Bhd
by 12%, resulting in a 2% reduction in FY18E core net profit.
The research firm is scaling back its timeline of launch for the Bandar Tun Razak, Cheras, project resulting in the FY17E sales target reduction to RM1.26bil while the FY18E target is maintained at RM1.42bil.
It is toning down the target price to RM2.47 from RM2.63 based on a wider 40% discount to its FD RNAV of RM4.11, considering the heightened sensitivity among investors with regards to weaker-than-expected sales trajectory.
It has maintained UOA Development's FY17-18E dividend per share at 15 sen at a pay-out ratio of 64% each.
Last Friday, UOA Development's shares plunged 6.7% to a new year-to-date low of RM2.35 on the back of 4.16 million shares done.
However, Kenanga Research believes the sell down is unwarranted as the fundamentals are stable even after accounting for potential risks in the delays of the new launches.
"We contacted the management and it appears that there are no major news or corporate developments," said Kenanga Research.
The research firm said the price pull-back on Friday was too servere and even with a lower target price, it has upgraded the counter to Outperform from Market Perform.
In its update, the research firm noted that United Point Ph 3 (RM500mil) and Sentul Point Ph 3 (RM500mil) have been released for sales and take-ups will be available in Q3 figures.
South Link (RM550mil) has commenced registreation and the launch is expected soo.
Other launches for the year will include affordable housing in Selayang with a GDV of RM90mil and Bandar Tun Razak, Cheras (RM300mil) although sales may spill over to 2018 owing to a year-end launch.
"Earnings-wise, 3Q17 should meet our expectations because we anticipate completion of Southbank by 2H17; but we do expect 3Q17 core net profit to be lower q-o-q due to 2Q17 high base effect due to three projects’ completion that quarter," said Kenanga Research.
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