23 April 2012
Kenanga Research anticipates UOA's strong dividend payouts to continue
Kenanga Investment Bank Research is maintaining its Outperform on UOA Developments Bhd.
It said on Monday it expects UOA's projects to buck the bearish trend while the anticipation of its continuous strong dividend payouts will lend strength to the stock.
"No changes to our target price of RM1.65 based on 52% discount to FD sum-of-parts RNAV of RM3.46," it said.
To recap, UOA Developments is entering into a conditional en bloc sale agreement of its investment property of one office block in Horizon @ Bangsar South City to DKLS Industries (DKLS) for RM93.8mil or RM710.61 psf on a GFA basis.
FY12E income statement gains on disposal would be RM20mil (before tax), which will be booked in as fair value gains in 2Q12 even though the sale is expected to be completed only in 4Q12. This excludes cumulative fair value gains of RM40mil.
The disposal price is attractive given expected gross profit gains of more than 50%. Assuming a 85% utilization rate on the Horizon office, we estimate that the implied sale price psf on a NSA basis works out to RM836psf.
"Given that it is an en bloc sale, we believe the pricing is good when compared to the recently launched Vertical offices @ Bangsar South price tag of RM850psf (NSA basis)," it said.
Kenang Research said it was positive on the deal as the group is likely to pay out 50% of the total net gains on disposal, as well as, increase its cash pile by 72% to RM210mil and strengthen its net cash position to 0.11 times.