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

UOL Group - OCBC Investment 2017-11-13: Boost From UIC Consolidation UOL GROUP LIMITED U14.SI

UOL Group - Boost From UIC Consolidation

  • UOL's 3Q17 results within expectations.
  • Boost from accounting consolidation.
  • Upturn in domestic resi sector.

3Q17 net attributable profits, excluding other gains, up 8% YoY 

  • 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.

Turnaround in domestic residential prices 

  • 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