Decent UOA Dev Hits New Low

From a retail IPO price of RM2.52 just over 2 months ago, UOA development share price has fallen 42% to close at RM1.47 yesterday, while touching a historical low of RM1.40. A set of promising FY11Q2 financial results do not seem to offset the selling pressure resulting from the gloomy global economy outlook.

UOADEV has a cash and equivalent of RM368mil, compare to a total borrowings of RM21mil only. Some people may worry that after the Bangsar South mega project completes, UOA Dev may run out of source of revenue. However, it still has future development Sri Petaling, Segambut & Glenmarie, and is in a strong cash position to acquire new land.

Can UOA Dev share price rebound next week? Will it dive further? Well, it all depends on the whole market sentiment. Yesterday US market is up, even though no concrete good news from Bernanke. Next week there will be a long holiday in between the week. So, expect the trade to be cautious with low volume in Bursa.

     UOADEV: going south

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UOA DEVELOPMENT BHD RECORDS A STRONG QUARTER WITH OVER RM60 MILLION IN PROFIT AFTER TAX

Kuala Lumpur, 25 August 2011 - UOA Development Bhd on 23 August 2011 announced its financial results for the second quarter ended 30 June 2011.

For the quarter under review, UOA recorded positive growth in revenue at RM173.33 million, marking an 18.9% quarter-on-quarter (QoQ) increase. Current quarter’s gross profit is 12.1% higher with a gross profit margin of 50.6% for the first half of 2011. Normalised Profit After Tax and Minority Interests (PATAMI) excluding fair value adjustments rose considerably by 44.6% against the preceding quarter from RM42 million to RM60 million.

The results are also reflected by a significant shift in revenue and gross profit contribution from commercial to residential segment. For the first half of this year, UOA recorded strong sales of RM533 million on the back of strong demand for its development properties. The total revenue contribution from the residential segment increased from 25% (over RM36 million) in the first quarter (Q1) of 2011 to 59% (approximately RM101 million) in the second quarter (Q2) of 2011 in line with increasing focus by UOA to meet the growing demand for residential properties in Klang Valley.

UOA maintains a strong balance sheet position with cash and equivalent of RM368.37mil as at 30 June 2011, which together with the low gearing ratio, allows for potential future land acquisition and development.

UOA will continue to actively address the demand for quality commercial and residential properties with the development of its land bank that constitutes a saleable area of over 1.4 million sq m including its flagship project, Bangsar South and other upcoming developments in key locations such as Taman Desa, Sri Petaling, Segambut and Glenmarie that will form a solid basis for its growth over the next five to seven years.

UOA will capitalise on its strong balance sheet and continue to seek opportune and strategic development lands while maintaining a focus on strategic locations within the Greater Kuala Lumpur.

In the pipeline for the remaining part of the year are various UOA’s project launches including Villa Botanica and One@Bukit Ceylon Hotel Suites with a total estimated GDV of RM420 million which are expected to increase the total new sales for 2011.

Analysts are of the opinion that UOA is on track to meet the expectation for 2011 barring any unforeseen circumstances.

    Bangsar south: transform Kg Kerinchi & Pantai Dalam

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform rating on UOA Developments Bhd after its annualised 1H core net profit met expectations at 93% of its forecast and 94% of consensus projections.

The research house said on Wednesday, Aug 24 that future quarters should be stronger as recognition of the strong year-to-date sales picks up pace.

CIMB Research said the good results should also boost confidence in the group’s ability to meet the research house’s FY11 core profit forecast of RM224 milllion.

“However, in view of the stock market turbulence of late and global slowdown fears, we now value UOA Dev at a 20% discount to market P/E instead of 10% given the higher risks inherent in its large exposure to high-rise residential and commercial development.

“Our target price falls from RM3.25 to RM2.89 as we lower our P/E target from 13.1x to 11.6x. We maintain our OUTPERFORM call in light of the potential catalysts of 1) improving earnings, 2) continued strong sales and 3) landbank acquisition,” it said.

CIMB Below Forecast?

In a bear market, good news are generally ignored. Investors do not react much to good news, but tend to react excessively to bad news.

For CIMB, it seems like there is no single special reason for its recent dive in share price. It's below RM7 today, a psychological support? The major concern seems to be the slower than expected growth, which does not meet some people's forecast, and of course the Indonesia issue may also weigh in.

Anyway, EPF and Mitsubishi Financial group are accumulating CIMB's shares in August.

Everyone is waiting for Bernanke's speech today.

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KUALA LUMPUR: The stock of Malaysia's number two lender took a beating yesterday, closing 4.6 per cent down to a one-year low of RM7.25, on concerns of slower growth this year.

Analysts said as the stock has a lot of foreign owners, it was no surprise that there were more sellers than buyers since Wednesday, despite CIMB Group Holdings Bhd's record second quarter earnings on Tuesday.

"It is similar to Axiata's stock. Axiata also has high foreign shareholding and it suffered the same fate," said one analyst.

The analyst said since CIMB has always commanded a high valua-tion, a slight concern over its performance can easily affect the stock price.

CIMB's earnings rose 9.1 per cent to a record RM970.01 million in the second quarter ended June 30 2011 from RM889.46 million a year ago.

Despite that, it was considered to be still 9.2 per cent below the consensus of most analysts.

They attributed the sell down of the stock to mostly concerns over slower loans and non-interest income growth.

MIDF Research for one has cut CIMB's earnings forecast for 2011 by 6 per cent due to the low loan growth.

OSK Investment Bank equity capital market head Gan Kim Khoon said CIMB's results were below the expectations of many.

"And there are concerns over its stake in Indonesia's Bank Niaga as CIMB has got more to lose with the new ruling compared to Maybank," he said.

CIMB: Why 2 Long Black Candlesticks?

CIMB has just achieved a record in its 2011Q2 profit. However, its share price fell 54sen (7%) with high volume from RM7.79 to RM7.25 in just 2 days! Why? I also want to know. Generally market sentiment is currently lifted a bit. If no particular devastating bad news, then may be can consider to buy already...??

From Reuters:

CIMB’s second-quarter net profit of RM970.02 million exceeded a JP Morgan forecast, which pegged the quarter’s earnings at RM942 million. 

Eighteen out of 24 analysts tracked by Thomson I/B/E/S have a “Strong Buy” or “Buy” call on CIMB, while five have “Hold” calls. 

     CIMB is facing selling pressure

Perhaps the CEO is too "honest" and pessimistic?

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Group chief executive Datuk Seri Nazir Razak said: 

“We had another quarter of record profits in the second quarter, underpinned by a strong uplift from our Malaysian consumer banking operations and continued high growth at CIMB Niaga.

“We are, however, still behind our return on equity (ROE) and balance sheet growth targets for the year as we have been treading more cautiously given the uncertain global environment.”

“We are maintaining our 17% ROE target, but with a cautious outlook, meaning that we are more conservative to risk. We maintain more liquidity, more capital and more diversification of portfolio,” 

Nazir said his caution stemmed from the weakness in Western economies, which were not just volatile, but also diminishing in trust.

This could potentially cause a repeat of 2008 (credit crisis in the United States).

“Right now, India, China and the Middle East are pre-occupied and cannot offset the impact like what they did in 2008,” he said.

“The Asean region is strong, but it doesn't have much fiscal space to offset the deteriorating external outlook. Unlike in 2008, we may not be as immune to that crisis this time.”

Some of the indicators to watch out for would include a more credible debt resolution plan from the Western world, he said, adding that a more concrete plan by the West was absolutely needed.

“Another thing favourable could be a big drop in oil prices which will lower cost to the United States and could be a big boost to the US economy. These are some of the indicators we would be looking at.”

On talk that the Indonesian central bank was to enforce a ruling for foreigners to pare down their stake to below 50%, Nazir said this was the prerogative of the Indonesian government, and if it really happened, then CIMB would abide by the rules. Presently, CIMB holds a 96% stake in PT Bank CIMB Niaga Tbk.

“We will be disappointed if we have to reduce our stake in Bank Niaga, but we hope to be able to continue to fully invest in it. My pre-emptive measure is to pray very hard,” said Nazir.

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Is it because of the concern on Indonesia CIMB Niaga's stake? Is it something related to MBF holdings? Is it because of the decreasing revenue despite raised profit? Is it because Maybank has better financial results and dividend payout? Is it just panic-selling? Is it others?

Perhaps CIMB's CEO should talk in KNM's style (dead also can talk until alive).

KNM = KNS

KNM disappoints again. Its FY11Q2 registered a profit after tax of RM9.9mil. However, a big chunk of it comes from tax incentive given by the government. Without it, the profit before tax is a mere RM1.8mil this quarter for such a "big" company. This figure means the PBT is down 71% QoQ and down 78% YoY, despite a better revenue.

RM mil	Revenue	PBT	Debt
FY10 Q1	373	0.2	1160
FY10 Q2	383	8.3	1080
FY10 Q3	418	41.0	1070
FY10 Q4	384	6.9	1050
FY11 Q1	413	6.3	1010
FY11 Q2	544	1.8	1030

With a profit like this, how is it going repay the big sum of debt? 

A bit of positive is the rising revenue, order backlogs of  RM5.5bil and tender book of RM17bil. If the overall market is slow to improve and the profit margin continue to diminish, will we see KNM making loss in future quarters?

How about KNM's profit guidance of EBITDA of RM363mil for FY2011???