UOL Group - CIMB Research 2015-12-09: Multiple engines

UOL Group - CIMB Research 2015-12-09: Multiple engines UOL GROUP LIMITED U14.SI 

UOL Group - Multiple engines 

  • Diversified business model with strong cashflow generation from investment properties and hotel operations. 
  • Principal Gardens to extend residential earnings visibility. 
  • New property and still-positive rental spreads to underpin rental income. 
  • Pan-Asian hotel presence, with plans to expand into Europe. 
  • Maintain Add with unchanged RNAV-backed target price of S$8.24. 

■ Diversified business model with strong cashflow generation 

  • UOL has a diversified business model spanning across residential, commercial and retail as well as hotel operations. 
  • In addition, it derives dividend income from its stake in UOB shares. This provides the group with a strong recurrent cashflow base (56% of 9M15 topline), with earnings boost from residential development activities. 

■ Launch of Principal Gardens to boost 2H16 earnings 

  • The recent launch of Principal Gardens, which has a 20% take-up rate at an average selling price of S$1,630psf, has extended the group’s development earnings pipeline. 
  • This is in addition to progressive billings from Botanique at Bartley (71% sold), Riverbanks @ Fernvale (64% sold) and Seventy St Patricks (96% sold). 
  • Overseas, its 398-unit residential project in Changfeng is also slated for launch in 1Q16. 

■ Rental income boost from One KM 

  • In addition to positive rental reversions for its office and retail properties, a full year’s contributions from One KM also helped lift rental contributions. 
  • Meanwhile, with an estimated one-third of its leasable area due to be renewed in 2016, the still-marginally positive spreads between spot and passing rents for its office space should lead to a slight uplift in rental income. 

■ Strong hotel brands, pan Asian presence 

  • UOL operates the Pan Pacific and Parkroyal hotels and serviced suites brands. As at 3Q15, it owned 6,163 rooms and managed a further 9,865 keys across Singapore, Malaysia, Australia, Myanmar and Vietnam. 
  • The group is also diversifying geographically with its first 190-room Pan Pacific-branded hotel in London. The latter is part of a mixed-use development comprising 109 residential units with a retail and hotel component. 

■ Maintain Add 

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

LOCK Mun Yee CIMB Securities | 2015-12-09
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 8.24 Same 8.24