UOA has announced that its wholly-owned subsidiary, Nasib Unggul Sdn Bhd has proposed to sell a 14-storey office building at Bangsar South to DKLS Industries Bhd for RM93.8mil cash. The 14-storey vacant building which has a gross floor area of 132,000 sq ft is currently held as an investment property. Its postal address is Tower 8, Avenue 5, The Horizon Phase 2 @ Bangsar South. We estimate the proposed disposal values the office block at RM1,050 psf of net lettable area.
We are positive on the proposed disposal as the estimated disposal price of RM1,050 psf will set a new benchmark for Bangsar South offices, it is also higher than our expectation of RM900 psf. UOA is also expected to recognise RM20mil gain on disposal from the property sale unlocking UOA’s asset value and increase the company’s cash holding by RM94mil.
And the higher take-up rate for Bangsar South offices (and subsequent increase in occupancy rate) will increase the area’s vibrancy and improve take-up rates for future property launches.
We have raised our financial year (FY) 2012 earnings per share forecast by 9% to 18.5 sen, after inputing the RM20mil gains on disposal. We have also tweaked our FY2013-2014 core net profit forecast by 1% on higher interest income. No change to our buy rating and target price of RM1.86, based on 30% discount to revised net asset value. We continue to like UOA for its undemanding valuation at 8.4 times FY2012 PER, one time price to net tangible assets and high dividend yields of 5%. Also because of UOA’s strong cash position of RM280mil as at end-December 2011 – after the completion of its proposed disposal, its cash holding will increase by RM94mil and strong project execution record.
UOS Price at posting:
41.5¢ Sentiment: LT Buy Disclosure: Held
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