UOL Group - CIMB Research 2015-11-12: Mixed performance

UOL Group - CIMB Research 2015-11-12: Mixed performance UOL GROUP LIMITED U14.SI 

UOL Group - Mixed performance 

  • 3Q15’s net profit largely in line, making up 23% of our FY15 estimate, dragged down somewhat by slower hotel contributions and also from high base in 2014. 
  • Singapore residential to remain the main earnings driver on progressive billings from locked-in presales, while rental income boosted by One KM contributions. 
  • Maintain Add, with an unchanged target price of S$8.24, based on a 20% discount to RNAV. 

Drag from previous high residential base, lower hotel operations 

  • UOL reported an 18% decline in 3Q15 revenue to S$354m while net profit was 2% lower yoy at S$100.8m. The weaker performance was due to lower residential contributions, owing to a high base in 2014 and slower hotel contributions. This was partly offset by higher rental and dividend income. 
  • Associate and JV contribution was 13% higher yoy on increased contributions from UIC, while Archipelago received its TOP during the quarter. As a result, EPS came in at 12.75 Scts, -3.5% yoy. 

Singapore residential benefits from strong locked-in sales 

  • Excluding the lumpy revenue of S$212.2m from The Esplanade Tianjin, residential revenue would have been higher yoy, with billings from Botanique at Bartley ( >70% sold), Riverbanks @ Fernvale (64% sold), Seventy St Patricks, while Katong Regency obtained its TOP. 
  • UOL recently launched Principal Gardens and generated an encouraging 20% take-up rate at an average selling price of S$1,630psf. Its residential project in Changfeng is also slated for launch in 1Q16. 

One KM boosts rental income base 

  • Rental revenue was up 16% yoy, with additional income from One KM as well as still positive rental reversions at its office and retail properties. With an estimated one third of its lease-able area due to be renewed in 2016, the marginally positive spreads between spot and passing rents for its office rents should still lead to a slight uplift in rental income. 

Hotel operations dragged down by some renovation works 

  • Hotel and hotel management fee revenue fell 4.3% to S$110.5m, impacted by refurbishment works at Pan Pacific Perth and Parkroyal Yangon, as well as the weaker RM and AUD. Meanwhile, its Singapore operations have stayed relatively stable, underpinned by a slightly better performance at Parkroyal at Pickering. With the renovation works largely completed at the former two hotels, we expect hotel operations to remain relatively stable going forward. 

Maintain Add, diversified business model with strong cashflow 

  • We retain our Add call, with an unchanged target price of S$8.24. 
  • We continue to like UOL’s diversified business model with its strong cashflow generation. 
  • Given UOL’s healthy balance sheet and gearing of 0.31x, we believe it is well positioned to replenish its landbank to extend its earnings visibility.

LOCK Mun Yee CIMB Securities | 2015-11-12
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 8.24 Same 8.24