In the doldrums for many years now, the property industry lacks investor interest. Although it may seem a “boring” sector at times — especially after the property boom between 2010 and 2015 — it is worth noting that there are developers that work hard to justify the trust that investors place in them.

UOA Development Bhd appears to be such a developer as its three-year return on equity (ROE) of 9.1% is the highest among its peers in the RM3 billion and above market capitalisation range. Apart from its property projects, the company also receives rental income from its investment properties.

Sadly, its ROE has been on the decline over the last three financial years. From 12.4% in FY2017, the company’s ROE fell to 8.4% in FY2018 and 8.2% in FY2019.

A look at its financial statements shows that UOA’s net profit increased to RM399.47 million in FY2019 from RM378.92 million in FY2018. However, it was still lower than the RM506.74 million achieved in FY2017. Nevertheless, its total assets increased to RM5.96 billion in FY2019 from RM5.59 billion in FY2017.

The property developer appears to be prudent in its debt management, with its gearing declining to 0.02 times in FY2019 from 0.03 times in FY2017. Total borrowings have steadily decreased in the last three financial years from RM126.83 million in FY2017 to RM120.3 million and RM98.61 million in FY2018 and FY2019 respectively.

While the company’s net profit rose in FY2019, its share price has not moved in tandem. Between the start of 2017 and Oct 5, 2020, its share price had fallen 33% from RM2.36 to RM1.58.

According to analysts, UOA’s land bank has a total gross development value (GDV) of RM15.9 billion, and news reports say the developer is looking to acquire more land. Some of its ongoing projects are Sentul Point, South Link and The Goodwood Residence.

Because of Covid-19, property sales were limited to preparatory marketing work during the Movement Control Order period. The company resumed its sales and marketing activities after the MCO was lifted, but it is mindful of the potential effects of the pandemic on both the local and global economy.

“The group remains cautious and will maintain its focus on the mid-end residential sector within the Klang Valley,” UOA said in its 2019 annual report released on May 29, 2020.

AffinHwang Investment Research said in an Aug 26 report that the property developer had unbilled sales of RM578 million, which will support its earnings over the next two to three years. The research house pointed out that the company’s net cash had increased to a 10-year high of RM1.08 billion as at end-June, which would put it in a strong position to weather any downturn.

In September, UOA announced plans to dispose of UOA Corporate Tower to a related party, UOA Real Estate Investment Trust, for RM700 million cash, which is expected to increase its cash position.

However, analysts are of two minds regarding the disposal. While some say that with a healthy balance sheet, UOA would not need to resort to more borrowings for the development of its investment properties in Bangsar South and Jalan Ipoh, others maintain that the developer would lose out on rental income of RM44 million. This could reduce its earnings by 15% to 16% in FY2021 and FY2022, says CGS-CIMB Research.

At this juncture, there are still more “buy” calls on the stock than “neutral”, with three analysts recommending the former and two the latter. There are no “sell” calls.