Why Ultima United (ASX:UUL) rose over 2800% in the last one year?

Summary

  • Ultima United was one stock that surged by a whopping 2837% in the last one year.
  • Ultima United is a small-cap ASX listed real estate developer, having operations in Australia.
  • The company’s real estate portfolio developments, including a recent acquisition of three plots of land, is proving to be a turn-around for the company.

The real estate sector faced some heat during the pandemic due to stringent restriction on people's physical movement. The pandemic had put a significant question mark on the relevance of workspaces for some industries, especially after the unprecedented rate of development in the technologies enabling to work remotely.

However, there is one Dark Horse in the small-cap space that made a spectacular run of over 2800% in 2020, which caught the street's attention. Ultima United Limited (ASX:UUL) is a small-cap ASX listed real estate developer which cheered the investor last year with a massive rally. But what fueled this gigantic rally?

Stock Performance

Image Source: © Kalkine Image 2021

In the last one-year, United Ultima’s share price has surged from A$0.016 to A$0.47, delivering a whopping return of 2837%. However, the massive rally could also be attributed to the low liquidity of the stock.

About Ultima United

Ultima United is a real estate developer currently operating in Australia and generates revenue from developing and managing properties. Presently the company is holding residential apartments in Bentley and Cannington.

It also diversifies its revenue from the sale of properties it develops or acquires for which it continually strives to increase the valuation of its properties.

Recent acquisition and capital raising

On 30 December 2020, the company announced its plans to acquire three lots of land from the Infinity Capital Group Japan (ICGJ). The three lots are situated at a real estate development project called TELLUS Villas (TVP) located in Niseko, Japan.

TVP is a 17-lot land plot spread over an area of 34,000m2 owned by ICGJ. As per the transaction, ICGJ would be appointed as the project manager of TVP. The exact terms of the agreement are yet to be finalised. United Ultima is now looking to enter into a more formal agreement, which would further determine the transaction's precise terms.

For the transaction, the company has decided to raise a total of A$20.19 million via issuing 33.65 million ordinary shares at an issue price of A$0.60 per share. For the capital raising, the company will also seek the shareholders’ approval.

Out of the total proceeds, A$6.35 million would be used to acquire the plots while A$12.98 million would be utilised to construct villas on these plots.

Read More: Residential real estate regains its shine as house approvals hit a 20-year high

Existing project update

As of 30 September 2020, the company had sold two units of the Cannington Project and all the remaining units had been rented out. They also entered a two-year lease agreement for ten units at 3 Oak Street, which will provide A$7,800 of rental income per week.

The company has also initiated the development of special disability accommodation in its Bentley Project, for which feedback has already been obtained from Bentley National Disability Insurance Scheme approved service providers. The company will be constructing six villa type accommodations, the plan of which has already been submitted for approval.

September 2020 quarterly cashflow update

In the quarter ended September 2020, the company reported a net cash outflow of A$32,000 from the operating activities. A significant chunk of the operating expenses was incurred on administration and corporate cost front. No activity was seen on the investing front during the September 2020 quarter.

The company also repaid the borrowings worth A$5,000 as far as financing activity was concerned. The company had ended the quarter with a net cash reserve of A$61,000.

 

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