Ann: UOA Development Bhd - Profit Result (1st Qtr 2024), page-5

Hi Steve,
In terms of the future profit, I think there are quite a few moving parts, so it is difficult to say with any certainty. If we exclude revaluations - which are largely based on market conditions - i look at profit in broadly 3 buckets as follows.
1. Gross profit derived from sales of completed properties. Referencing the 1Q24 report, this would have made up at least 50% of the RMB 38m in gross profit in 1Q23. But for 1Q24, this is close to zero ("the sale of stocks during the quarter was not material"). Assuming Goodwood Residence is now close to sold out, i'd assume this bucket will not contribute much profit for the next 18 months. The only way this could change is if they decide to start selling some of the properties that are currently holding as investments.
2. Gross profit derived from sales of properties under development. Based on the above, it can be implied that this bucket makes up most of the RMB 27 million in gross profit reported in the 1Q24 report. I think this will steadily increase quarter on quarter as new sales of "off the plan" properties are secured and therefore there is a growing number of sales contracts against which they will progressively report profit (the revenue and profit is progressively recognized based on a "% complete" each quarter i believe). The good thing about this profit bucket is that once a contract for sale is secured, it is almost like recurring revenue / profit each quarter until the development is complete. That is the reason why it should progressively increase.
3. Non-development profit. Essentially this is profit from "Other Revenue" (i.e. parking revenue and rent on investment properties, hospitality income etc plus interest income (on the huge cash pile), less admin and other expenses. You can work this out by subtracting gross profit (which is development related profit) from total profit before tax. In 1Q23 this was circa RMB 19m and in 1Q24 it had increased to RMB 34m. Based on comments from the AGM, i believe this should continue to increase. Firstly, some investment properties are not fully rented. Second, from AGM comments it seems that there is further upside in hospitality and parking revenue. Thirdly, AGM comments suggest there were some one-off abnormal admin / general costs included in FY23.

So, putting the above together, id say there should be steady growth in profit from the 1Q24 base point. The growth in bucket 2 in particular should gain momentum and over time exceed any weakness from bucket 1.

All of the above relates to UOA Development. For UOS, there should be some additional growth due to the commencement of a second development tower in Vietnam in FY2024, which is a UOS investment, not UOA development. I am guessing this won't have a material impact in FY2024, but in future years could be considerable.