Pipeline launches are going as planned and UOA Development (UOAD)’s new food and beverages business should complement its property projects, said RHB Research (RHB) in the recent Malaysia Company Update Report.
“We expect its investment properties to drive earnings slightly in the coming quarters, premised on higher occupancy rates. While its net cash is still solid at RM2.2 billion, catalysts are lacking, especially in view of the current market risk arising from the upcoming state elections. Our new target price is now based on a 45% discount to revalued net asset value (from 40%), with a 2% environmental, social and governance discount applied,” said RHB, maintaining Neutral for the stock.
UOAD recently announced its involvement in some new food and beverages business via a 51%- owned subsidiary which operates Botanica Co Restaurant and Potager. RHB understands that this food and beverages business is already profitable, but management has no plans to aggressively expand this new venture.
The food and beverages business is mainly to complement existing and upcoming projects (such as Bamboo Hills) in order to create awareness and boost catchment. Currently there are two Botanica Co restaurants, and the first Potager will be opened later this year at Bamboo Hills.
“The highly anticipated maiden launch of Bamboo Hill Residence at Jalan Ipoh will be in quarter four 2023. Management has yet to set the prices, but we expect an average selling price of RM600- 700 per sq ft for the area,” said RHB.
RHB understands that the first residential component will be located near to the mass rapid transit station, so the project’s strategic location should spur demand from investors and owner-occupiers.
UOAD plans to launch two office tower blocks next to Vertical Corporate Tower, as demand for office space in Bangsar South has been encouraging.
This fetches a gross domestic value of RM1.3 billion, but only about one-third of it is planned for sale as small strata offices, while the remainder will be kept as investment units.
“We believe the office lots will be priced at around RM950-1,000 per sq ft, in line with the transaction of Vertical Corporate Tower at RM955 per sq ft when the building was sold to UOA REIT in 2020,” said RHB.
While construction works and, as such, billings from ongoing projects are progressing as usual, RHB expects the recurring income from UOAD’s newer office assets to pick up further in the coming quarters.
New retail spaces at United Point and South Link have higher occupancy rates of more than 70% and more than 50%. In quarter one 2023, all of UOAD’s investment properties contributed RM74.6 million to net profit. New property sales and unbilled sales stood at RM124 million and RM226 million.
