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
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http://research.itradecimb.com/
2015-12-09
CIMB Securities
SGX Stock
Analyst Report
8.24
Same
8.24
