The lingering effects of the Covid-19 pandemic and slower construction activities amid a labour crunch are still apparent even as players in the local property industry navigate the new normal. However, one property company not only proved that it could weather these storms but also emerged stronger.
For the sixth straight year since 2017, UOA Development Bhd again takes home The Edge Billion Ringgit Club (BRC) award for highest return on equity (ROE) over three years among larger-cap peers in the property sector. It has also clinched the BRC highest returns to shareholders over three years award, an accolade it won in 2018 and 2019.
The pandemic has had an impact, for sure, as shown by the numbers collated according to the awards methodology. UOA Development’s ROE slipped from 8.2% in 2019 to 7.5% in 2020 and skidded further to 4% in 2021. However, the adjusted weighted three-year ROE of 5.9% for the period from 2019 until 2021 was still the highest among developers with a market capitalisation above RM3 billion. ROE, which is calculated by dividing net income by shareholders’ equity, is a gauge on how efficiently profits are being generated.
Despite the pandemic ravaging the balance sheets of many corporations, the property developer continued to reward shareholders for the period under review, which is evident in the shareholders’ returns for three years. During the period reviewed for the awards, UOA Development’s adjusted share price went from RM1.73 on March 30, 2019, to RM1.76 a share this year on March 31 — translating into a three-year compound annual growth rate (CAGR) shareholder return of 0.7%, a number that may not seem all that impressive at a glance, but one that beat its peers during tough times.
It is also worth noting that, despite the tumultuous operating environment, UOA Development maintained its dividend payout to shareholders — 14 sen per share in 2019 and 2020, and 15 sen in 2021.
To be sure, UOA Development was not spared from the broader market weakness. Year to date (YTD), its share price has fallen 17% from its peak on June 2, 2022 of RM1.91 to RM1.58 as at Oct 28, though still an improvement from as low as RM1.53 on July 18 this year. Nonetheless, investment analysts who track the group see promising prospects ahead. Four out of five analysts who cover UOA Development had a “hold” recommendation on the stock with a target price of RM1.73 at the time of writing.
Although the group’s net profit slipped 16.6% to RM45.3 million in the second quarter ended June 30, 2022 (2QFY2022) from RM54.4 million a year earlier on the back of lower sales, its total unbilled sales as at June 30, 2022 amounted to approximately RM123.9 million.
Still, there may be upside from its ongoing projects. Current developments include The Goodwood Residence within Bangsar South; Aster Green Residence within the established township of Sri Petaling; and Komune Living & Wellness (formerly known as Bandar Tun Razak development), a project within the dynamic and thriving township of Cheras. The three projects have a combined gross development value (GDV) of RM1.2 billion.
Developments in the pipeline include Desa 3, Laurel Residence and Sri Petaling Phase 2, which are targeted for launch this year. Desa 3 comprises eight units of semi-detached houses located in Taman Desa. Laurel Residence comprises two blocks of 1,260 residential units located in Bangsar South, while the second phase of Sri Petaling adjacent to Aster Green Residence comprises two blocks of 1,238 residential units. These three projects have an anticipated combined GDV of RM1 billion.
The group says it will cautiously time its future launches in line with the property market sentiment and overall economic conditions.
Founded and listed on the Australian Stock Exchange as United Overseas Australia Ltd in 1987, UOA focuses on property development, construction, property investment and property management. Since 1989, the group has based its headquarters and business operations in Kuala Lumpur.
On June 8, 2011, UOA successfully listed its construction and development division UOA Development on the Main Market of Bursa Malaysia, which placed the company as one of the largest listed property development companies by market capitalisation in the country.
Highest return on equity over three years: Plantation: United Plantations Bhd - Bumper returns from responsible planter
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United Plantations Bhd (UP) is no stranger to The Edge Billion Ringgit Club (BRC) awards, being among the winners in 2010 when the awards began and recognised for its efforts in corporate responsibility more than once.
For the second straight year, the niche oil palm planter is taking home the award for highest return on equity (ROE) over three years, which it also won in 2010.
UP, which has plantation estates and mills in Perak and Indonesia, posted a bumper profit of RM522 million for the financial year ended Dec 31, 2021 (FY2021) — a 30% improvement from the RM402 million achieved in FY2020.
Revenue increased 52% in FY2021 to RM2.03 billion compared with FY2020 mainly due to higher crude palm oil (CPO) and palm kernel (PK) production and sales prices.
Its palm oil production rose to 251,601 tonnes in FY2021, a 3.6% increase year on year, mainly attributable to the favourable weather conditions experienced in 2021 as well as the tremendous efforts undertaken to secure the crop despite severe labour shortages in 2020 and 2021.
Its plantation division in Indonesia generated a record group contribution of RM75.1 million in 2021 against RM42.5 million in 2020, representing an increase of 76.7%.
The good results were also primarily a function of the higher market prices for CPO and PK, and cost controls implemented during the year.
The record profit helped lift UP’s weighted return on equity (ROE) over three years to 16.6%, the best return among its peers in the plantation sector. ROE increased from 11.1% in 2019 to 15.5% in 2020, and 19.6% in 2021.
Earnings per share grew steadily from 68 sen in 2019 to 96 sen in 2020, and rocketed to 125 sen in 2021.
UP paid a dividend of 115 sen per share to its shareholders in FY2021 compared with 85 sen a share in FY2020.
In FY2021 its cash position stood at RM478 million compared with RM465 million in FY2020.
In its annual report, UP states that it will continue to maintain a conservative capital structure to have the flexibility to utilise internally generated funds for capital investments within the group, sustain a stable dividend to shareholders and have the capability to pursue new investments.
The group’s 2021 capital expenditure for property, plant and equipment (including bearer plants) and right-of-use assets was RM114.4 million compared with RM108.4 million in 2020.
During the year, RM29.8 million was spent on replanting activities on 1,733ha compared with 1,384ha in 2020.
UP’s largest shareholder is the Bek-Nielsen family, with a stake of 43.85% held via United International Enterprises Ltd and the family’s holding company, Maximum Vista Sdn Bhd, followed by the Employees Provident Fund (EPF) with an 8.8% stake and the Perak State Agriculture Development Corporation with a 5.79% stake.
On the group’s prospects and outlook, UP CEO Datuk Carl Bek-Nielsen says the UP management will continue to devise ways to manage the cost of raw materials such as energy, fertilisers, chemicals and building materials that has gone up due to global supply chain challenges.
He adds that special attention will continue to be given towards addressing the present acute labour shortages and increasing yields and productivity.
“We will pursue this relentlessly through continued mechanisation efforts and replanting of the older and less productive oil palm stands in order to take full advantage of our latest superior planting materials from our research department as a vital part of sustaining our positive development,” says Nielsen in the 2021 annual report.
He adds that UP’s positive liquidity and conservative capital resources position will enable the group to perform satisfactorily without the need for any asset impairments arising from the current global market developments.