UOL Group - OCBC Investment 2017-11-13: Boost From UIC Consolidation

UOL GROUP LIMITED U14.SI

UOL Group - Boost From UIC Consolidation

UOL Group’s net attributable profits, excluding other gains, for the quarter increased 8% YoY to S$90.9m.
3Q17 PATMI increased from S$91.5m to S$639.7m as a result of accounting for UIC as a subsidiary following the group’s acquisition of 60m UIC shares in August. This bump in profitability is mainly due to a fair value uplift of UIC assets, namely S$421m to PPE, which will result in higher depreciation in future, and a S$82.3m fair value uplift to development properties, which will lead to less development profits in future.
In terms of the topline, 3Q17 revenues similarly increased 37% to S$537.9m from S$393.4m mainly due to the consolidation of UIC. Excluding the effect of this consolidation, contributions from development fell by 3% mainly due to the completion of Riverbank@Fernvale in Mar 2017 whereas contributions from hotel operations increased 5% due to maiden contributions from Pan Pacific Melbourne which was acquired in end Jul 2017.

In addition to a turnaround in domestic home prices, management also expects office rents to stabilize ahead while the retail sector is expected to remain under pressure.
In the hospitality sector in Asia Pacific, UOL also highlights competitive pressures and an oversupply of rooms, particularly in China and Myanmar.
The group recently acquired Nanak Mansions in Meyer Road for S$201.1m through an en-bloc transaction with a 50-50 JV with Kheng Long. We understand the transaction will likely be completed in Dec 2017. The freehold site in district 15 has a land area of 10.2k sqm and is likely to be launched in 2019.
The other two domestic sites in its land-bank, 45 Amber Road (100% stake) and the former Raintree Gardens (50-50 JV with UIC), are targeted for launch in 2018.
We update our valuation model for latest results and firmer assumptions and our fair value estimate rises to S$9.70 versus S$9.01 previously. Maintain BUY.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-11-13

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 9.70 Up 9.010