UOL Group Ltd (UOL SP) - Maybank Kim Eng 2017-11-09: UIC Assets Marked Up

UOL Group Ltd (UOL SP) - Maybank Kim Eng 2017-11-09: UIC Assets Marked Up UOL GROUP LIMITED U14.SI

UOL Group Ltd (UOL SP) - UIC Assets Marked Up

Maintain BUY with slightly higher TP 

  • No surprises from its 3Q17 operating performance. 
  • Consolidating United Industrial Corp (UIC) as a subsidiary led to a large one-off gain booked in the quarter. Hotels held by Marina Centre Holdings are now marked to market and some development earnings have been front-loaded as part of the revaluation exercise. 
  • We continue to like UOL as a key beneficiary of the impending rebound in Singapore’s property market. We raise our RNAV estimates to SGD10.95 to incorporate MBKE’s latest TP for UOB (see report: United Overseas Bank (UOB SP) - Steady And Consistent). This lifts our TP to SGD9.85, based on an unchanged RNAV discount of 10%. Maintain BUY.

No surprises from operations 

  • Financial performance for the quarter was clouded by various adjustments for the consolidation of UIC. UIC was accounted as an associate for two months and consolidated as a subsidiary for one month.
  • Excluding one-off items, core net profit rose 8% YoY to SGD90.9m in 3Q17. No surprises from its operating performance.

Book value per share (BVPS) up to SGD10.95 after UIC revaluation 

  • UOL booked a one-off gain of SGD542m in the quarter after consolidating UIC as a subsidiary from 1 Sep. Majority of this gain came from the revaluation of the three hotels held by Marina Centre Holdings (Pan Pacific Singapore, Mandarin Oriental and Marina Mandarin). This implies that the 1,900 rooms in these hotels are marked up to slightly below SGD1m per key. 
  • Apart from that, projects currently under development, such as Park Eleven in China and The Clement Canopy, are also revalued to market value. This essentially front-loads some development earnings to this quarter. 
  • After this revaluation exercise, UOL’s Book value per share (BVPS) and NTA have increased to SGD10.95 and SGD10.71.

Resumes accumulation of UIC shares 

  • UOL continues to increase its stake in United Industrial Corp (UIC) after the recent share swap deal. 
  • As highlighted previously, we believe buying UIC shares allows UOL to access the underlying real estate at a discount and is a less-risky avenue for value creation in times of escalating land prices. The “creep rule ( < 1% stake increase every six months to avoid general offer)” continues to apply until its stake clears the 50% mark.

Swing Factors


  • Monetisation of property assets. 
  • Rebound in home sales. 
  • Unwinding or restructuring of cross-holdings in related parties like UOB, UIC and Haw Par.


  • Overpaying for land. 
  • Poor execution of development projects. 
  • Sharp increase in interest rates, which could dampen demand for properties and drive down asset prices. 

Derrick Heng CFA Maybank Kim Eng | 2017-11-09
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 9.85 Up 9.800