UOA Development announced that the Board of Directors of the company has on 18th July 2023 proposed the first interim dividend in respect of FY23 of 20sen per share. Shareholders will be given the option to elect to reinvest the entire dividend into new ordinary shares in UOA Development.
With a dividend yield of 12%, MIDF says it is positively surprised by the bumper dividend payout as UOA Development typically declares a dividend in the final quarter of the financial year. Historically, UOA Development has been paying dividends of 10sen to 15sen in the past 10 years. The house opines that the surprise dividend pay-out could be due to the rising cash pile of UOA Development. Note that the total cash and short-term investments of UOA Development stood at RM2.2b as of 1QFY23, increasing from RM1.8b as of FY21. As most of the money is sitting as cash, the management of UOA Development decided to make the distribution to the shareholders.
Meanwhile, the bumper first interim dividend of 20sen per share translates into a whopping dividend yield of 12% based on the last closing price of RM1.61. Minimal impact on the balance sheet. The impact on the balance sheet from the bumper dividend payout is expected to be minimal. As shareholders will be given to option to elect to reinvest the entire dividend into new ordinary shares in UOA Development, the impact on cash flow is expected to be minimal. Meanwhile, we estimate the balance sheet of UOA Development to remain healthy at a net cash position in the event that all dividend is paid in cash. Corresponding to the announcement of the first interim dividend, we raised our dividend forecast per share for FY23 from 10sen to 30sen which translates into whopping dividend yield of 18.6% for FY23.
Upgrade to TRADING BUY with a revised TP of RM1.91. MIDF raised its TP for UOA Development to RM1.91 from RM1.65 as narrow RNAV discount to 30% from 44% to reflect the high dividend yield of UOA Development.
