UOL Group - Healthy sales at Clementi condo
- 200 out of 250 units launched.
- Stable earnings profile.
- Undemanding 0.66x PB.
Over 200 units sold at The Clement Canopy
- It was recently reported that the group has sold 200 out of the 250 units launched for sale at its 505-unit condominium project, The Clement Canopy, at average selling prices of S$1.3k to S$1.4k psf.
- To recap, the 99-year leasehold project is a 50:50 JV between UOL and Singapore Land and is located near the National University of Singapore and the Clementi MRT station. The consortium acquired the 140.3k sq ft site (with a maximum GFA of 491.2k sq ft) through a successful S$302.1m tender at a government land sale exercise in Dec 2015. The acquisition price translates to S$615.04 psf and we estimate breakeven prices at S$1.0k to S$1.1k psf.
- Given the muted domestic residential market, we view this as a healthy launch performance and are encouraged at UOL’s continued ability to create value through projects with good location and product attributes.
Enjoys a relatively stable earnings profile
- We like that the group enjoys a relatively stable earnings profile in an uncertain operating environment; as at end 2016, about 82% of UOL’s operating profits are derived from recurring income sources including property investments, hotel operations, investments and management services, with above 90% occupancy rates achieved for almost all its commercial properties in Singapore.
- We understand that management continues to seek attractive investment properties and have recently entered into a deal to acquire the Hilton Melbourne Wharf for A$230m (c.S$246.1m), which will be rebranded as a Pan Pacific Hotel.
- In addition, we see current valuations of its share price to be undemanding at 0.66x price-to-book, particularly with its healthy balance sheet with 24% gearing ratio and S$301.5m cash.
- Maintain BUY with an unchanged fair value estimate of S$7.30.