UOL Limited - Phillip Securities 2017-08-07: Continues To Deliver

UOL Limited - Phillip Securities 2017-08-07: Continues To Deliver UOL GROUP LIMITED U14.SI

UOL Limited - Continues To Deliver

  • Stronger sales momentum and higher ASPs in Singapore development projects.
  • Buoyant land tender bids around Raintree Gardens to benefit project when launched in 2018.
  • Expect more land acquisitions amid improving sentiments and rapid absorption of existing inventory.
  • Maintained a rating of “Accumulate” with an upgraded TP of S$8.93, based on our FY17 RNAV estimates.



Positive 

  • + Stronger sales momentum and higher ASPs recorded in Singapore development projects: Revenue from property development grew 19% YoY to S$221.2 million amid accelerated sales and higher selling prices of existing development projects, The Clement Canopy and Principal Garden. We noted that ASPs of the two developments projects grew an average of 5.6% QoQ.
  • + Bulk of retail and commercial space expiring in FY17 has been renewed and were better than expectations: More than 70% of the Group’s retail and commercial space NLA expiring in FY17 reported rental reversions in the “single digit” percentage growth. This was better than our expectations as we were expecting pressures in rental reversions amid the oversupply of office space and lacklustre retail sales in 1H17, and pressures to only begin easing in 2H17.


Negative 


  • - Hospitality segment remained weak in Singapore and a mixed bag in Australia: RevPAR growth in Singapore was down 2% YoY (versus an industry average of 1.1%) amid ongoing weakness in the upscale hotel segment. While management mentioned that Sydney and Melbourne hotels grew at a “high single” digit and 2% YoY respectively, RevPAR of Pan Pacific Perth (1.7% of RNAV) registered a “double digit” decline.


Outlook 

  • ASP of existing development projects expected to increase amid rapid absorption: UOL currently has three ongoing property development projects in Singapore which are at least 50% sold. The Clement Canopy was launched earlier in March 2017 and is more than 58.8% sold by the end of 2Q17. We expect ASPs of existing development projects to gain an average of 5%, adding 4.5 S’cents to our RNAV.
  • Buoyant land tender bids around Raintree Gardens to benefit project when launched in 2018: We note that Land tender prices of the two land parcels beside Woodleigh MRT station were at least 34% higher than the price paid by UOL’s Raintree Gardens (S$797 PSF PPR). Consequently, we expect the optimism to benefit the Raintree Gardens when launched next year in 2018.
  • Expect more land acquisitions amid improving sentiments and rapid absorption of existing inventory:
  • While the Group has two more development sites slated to be launched next year, we are expecting the Group to turn more aggressive in land acquisition amid an improvement in the residential development landscape, as well as rapid absorption of its existing inventory.


Maintained a rating of “Accumulate” with an upgraded TP of S$8.93, based on our FY17 RNAV estimates 

  • We continue to favour the Group’s prospects, especially in Singapore development amid its solid execution and improving sentiments. 
  • The Group remains on track to launch two new Singapore development projects next year in 2018.




Peter Ng Phillip Securities | http://www.poems.com.sg/ 2017-08-07
Phillip Securities SGX Stock Analyst Report ACCUMULATE Maintain ACCUMULATE 8.93 Up 7.640



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