19 August 2013

UOA Development Bhd.

New fund injected into my portfolio. Bought this company at RM2.39, which is equivalent to PE ~8.5 and DY ~5%。

I had decided to select a properties company into my portfolio recently. But properties is a sector which I''m not familiar with.

To play safe, I decided to choose my candidates only among those biggest players in the sector. (In my believe, bigger always mean safer.)

So here's come the list of candidates -- the Top-10 property stocks listed on KLSE (in terms of market capital):
UEMS, SpSetia, Sunway, IjmLand, IGB, Mahsing, UoaDev, E&O, Trop, TAGB.

At first sight, it seems difficult to make a choice. However, after some comparison on their profitability, operational efficiency and stock price ratio, one company stand out remarkably.

Here's the figures:

Ranking Summary:
  • Highest margin: UoaDev,
  • Highest ROE : UoaDev,
  • Lowest gearing: UoaDev,
  • Lowest PE ratio: UoaDev,
  • Highest net DY: UoaDev,
  • Highest dividend payout: SpSetia.
an inevitable conclusion, UoaDev is The One.

 x x x

Other than these outstanding numbers above, there are also some features found on UoaDev that I love very much.

First, this company doesn't touch the Iskandar zone at all. In fact UoaDev only focus on Klang Valley area, doing development that provide high premium. While other property players are in a hot of running into Iskandar, I'm quite happy to be able to stay out of this.

UoaDev has relatively low amount of land-bank reserves compared to other companies. I like this very much, because it reflect the high turnover rate and efficiency of the company. UoaDev is one of a few developers that has its own in-house design and construction units, which enabled it to develop projects in a "fast-track" mode and reduce the holding cost on land. 
The special model of UOA: continuously seek and buy new pieces of land, construct building on it,sell them fast and make profit immediately. It's profit just doesn't rely on the appreciation of land value through time. Hence there's no need for the company to accumulate a large amount of landbank from many years ago. It will buy new lands only when it is needed.
 x x x

Growth potential.
a short review of the past.

Revenue experiences a good record of growth in past two years, while earnings goes up and down. In long run, I believe that the profit will follow the same growth trend as its revenue.

During the first quarter of 2013, the company record a revenue of RM 381million and profit RM 119million. I see a strong wave of growth coming.
  • New sales in 2011 was RM 848 million. 
  • 2012 the figure jump to RM 1.71 billion.
  • Company's target in 2013 is RM 3.0 billion.
    •  (of which RM928million already achieved in Q1.)
Seeing that its Bangsar South project is moving into a high-growth mature stage, I'm quite optimistic that the company could achieve profit CAGR of >20% in the coming years.
 x x x
This investment in UoaDev forms ~5% weight of my portfolio.

Expected return: strong 20~30% p.a. for the next three years, 10%~20% p.a. there after.
Expected holding period: as long as the company maintain its double digit growth.


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