Things I liked:The outlook comment was more positive than I have...

Things I liked:

• The outlook comment was more positive than I have read in the past five years. The board is normally very conservative, so this is a strong signal in my view.
• The majority of development revenue and profit is based on current properties under development (ie progressive recognition). This is primarily bamboo hills and duo tower, both of which have multi year construction timelines and will therefore generate continuing profits as development progresses. This is very positive for the trajectory of development profits. This point is reflected in Note 4 which highlights $278m in sales contracted and to be recognised in future periods (vs $99m last year). It is also evident in the balance sheet on the inventory and contract assets lines, which are growing nicely (and should continue to do so).
• Recurring revenue from parking, rent, hotel operations and other (mainly healthcare and hospitality) is all increasing nicely. In fact, the total of all of this (non development) revenue, less all major operating cost buckets (property maintenance, admin and other expenses of $113m) delivered a “profit” of $70m in FY24. This “profit” is up from $45m in the prior year and suggests significant operating leverage from this part of the business. Although I suspect revenue growth will slow, operating leverage should continue to provide solid earnings growth.
• There is an increase in cash holdings despite the current heavy development focus. This is due to the point above, implying that the cash generation from recurring revenue (less all costs) is enough to fund development activity and build the balance sheet. Note: There may be some currency translation impact in the cash holding, but it should not be significant as most of the cash is in $us (not MYR).
• Significant growth in value of investment properties. I assume this is mainly due to currency translation impact (MYR to $au).
• The 13 cent increase in nta per share is very pleasing. It looks like about half of this is forex translation benefit. Even still, a 6-7 cent increase is 11-12% return on current share price.

Things I didn’t like:

• Gross profit margin from development activity has decreased. I note last quarter was much improved for UOA so hopefully the margin returns close to 40%
• Dilution impact of the 5% discounted dividend on already undervalued share price. Having said that, you can protect yourself from the dilution impact by taking the reinvestment option yourself.
• Virtual meeting only is poor form and raises governance issues. There is no legitimate excuse for not holding an in person meeting (in addition to virtual)