UOL Group - CIMB Research 2017-05-12: 1Q17 Within Expectations

UOL Group - CIMB Research 2017-05-12: 1Q17 Within Expectations UOL GROUP LIMITED U14.SI

UOL Group - 1Q17 Within Expectations

  • 1Q17 net profit of S$80.3m was in line with our estimates.
  • Residential revenue underpinned bottomline growth with increased sales and progressive profit recognition.
  • Rental income and hospitality operations remained relatively unchanged yoy.
  • Two new residential launches in 2018 to underpin earnings visibility.
  • Maintain Add with unchanged TP of S$7.96.

1QFY17 results summary 

  • UOL reported a 4% rise in 1Q17 net profit to S$80.3m on a 6% increase in revenue to S$350.7m. Net profit was in line, making up 23% of our FY17F forecast. 
  • The improvement came mainly from the residential segment while rental revenue saw a slight uptick. Hotel revenue remained relatively flat over the previous period. 
  • Due to the skewed revenue mix towards lower-margin residential development activities, GP margin compressed slightly to 33%.

Residential revenue made up half of 1Q17 topline 

  • Residential revenue came largely from progressive billings from ongoing projects such as Principal Garden (55.4% sold), Botanique at Bartley (98.4% sold) and Riverbank (93.5% sold), while associate contributions were lifted slightly by maiden profits from The Clement Canopy (38.4% sold). 
  • Meanwhile, Park Eleven in Tianjin also saw 33.4% of its units sold at an ASP of RMB76,000psm.

Leasing and hospitality revenue held steady 

  • Rental income was up a marginal 2% yoy with added income from 110 Holborn. This helped to mitigate the downward pressure on retail rents while office rents held steady with increased tenant appetite. The group has renewed more than half of its office leases expiring in FY17 to date. 
  • Within the hospitality sector, its Singapore and Australia portfolios saw a marginal overall dip in Revpar, in tune with industry movements.

Two planned residential launches in 2018 

  • Looking ahead, the group plans to launch its two remaining land plots at Amber Road and Raintree Gardens, totaling c.890 units, in 2018. This should extend residential earnings visibility. 
  • UOL indicated that the Singapore private residential market appears to be stabilising on improved sentiment, following the recent adjustment to the property cooling measures. 
  • Completion and handover of P1 of Park Eleven in Tianjin would also mean full recognition of profits from presold units from FY18.

Maintain Add rating 

  • We continue to like UOL for its diversified business model and strong recurrent cashflow. We maintain our target price of S$7.96, based on a 20% discount to RNAV.
  • Key catalyst for share price performance would be continued good sell-through rate for its residential projects. Key risk is a slowdown in the residential transaction volume.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | 2017-05-12
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 7.960 Same 7.960