This article first appeared in The Edge Malaysia Weekly on August 28, 2017 - September 3, 2017

The property boom in Malaysia and some parts of Asia is said to have ground to a halt in 2015. But shareholders of UOA Development Bhd might not have felt much of the slowdown, looking at the company’s profit growth, dividend payments as well as share price performance in the past three years. It has outshone many of its peers.

UOA Development’s profit after tax grew at a three-year compound annual growth rate of 20.5% to RM710.6 million in its financial year ended Dec 31, 2016 (FY2016), from RM405.7 million in FY2013. During the same period, it recorded an impressive adjusted weighted return on equity of 16%.

Its profit performance has certainly lent support to its share price, which has been on an upward trend, although in the past two years, it has been somewhat volatile.

The share price rose  21% to RM2.70 in March, from RM2.23 in April 2013. This means shareholders who invested in UOA Development would have gained by about 6.6% annually in the last three years from the share price alone.

UOA Development has a dividend policy of paying 30% to 50% of its realised PAT. The company declared a single-tier dividend per share of 13 sen in FY2013 and FY2014. It raised its DPS to 15 sen in FY2015 and FY2016, which translates into an above-market average dividend yield of about 5.8% in the last three years.

However, group revenue fell  20% to RM996.2 million in FY2016 against RM1.24 billion in FY2013 due to lower property sales.

Management shared in the latest annual report for FY2016 that the increase in profitability was mainly due to fair value gains from investment properties completed during the financial year, mainly UOA Corporate Tower and the associated parking station at The Vertical in Bangsar South.

Total unbilled sales amounted to about RM1.57 billion, according to its results announcement for the first financial quarter ended March 31 (1QFY2017).

The quarterly financial results have showed signs of slow property sales. Its net profit declined 55% to RM43.4 million from the previous corresponding quarter. Group revenue fell by 23% to RM155.1 million year on year.

Revenue and profit for 1QFY2017 were mainly derived from the progressive recognition of its ongoing development projects — namely South View Serviced Apartments, Southbank Residence, Sentul Village, United Point Residence, Danau Kota Suite Apartments and Sentul Point Suite Apartments.

Following the announcement of the results, the group’s share price fell from RM2.73 to as low as RM2.50 in July this year, before rebounding to its current level of RM2.60 (July 31).

The earnings contraction in 1QFY2017 probably caused a knee-jerk reaction, creating some selling pressure on the stock. But the quick rebound also indicates that the company remains appealing, at least to some investors.

It is worth noting that UOA Development has a strong balance sheet with a net cash position — an important asset to weather the current soft market conditions. As at March 31, its cash balance stood at RM514.7 million and short-term investments amounting to RM187.4 million. Long-term debt stood at RM24.18 million and current liabilities were RM77.15 million.

The cash-rich balance sheet demonstrates not only its financial muscle, but its resilience as well.

UOA Development announced that it had entered into a sales and purchase agreement with Suilmeem Realty Sdn Bhd for the acquisition of a freehold parcel measuring 9,686.7 sq m (2.39 acres) near its Bangsar South City Project for RM81.1 million. The acquisition is expected to be completed by the third quarter of this year.

The group intends to develop the land into a commercial development to complement its current developments in Bangsar South City.

With a large war chest in hand, UOA Development is in an advantageous position to expand its land bank to ride the recovery, which some have say is already gaining momentum.

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