UOL Group - DBS Research 2018-05-14: Firing Up For Property Launches

UOL GROUP LIMITED SGX: U14

UOL Group - Firing Up For Property Launches

UOL Group's 1Q18 net profit declined 8% y-o-y to S$74m due to higher amortisation and depreciation from the consolidation of UIC.
Amber45 - 69% of released units sold at ASP of S$2,200psf (vs breakeven of S$1,500psf) over the weekend.
Tre Ver (ex-Raintree Gardens) expected to be launched in 3Q18.
RevPAR grew 2% to 8% across the portfolio.

1Q18 results impacted by higher depreciation from consolidation of UIC. UOL’s 1Q18 earnings fell 8% y-o-y to S$74m, mainly due to higher amortisation and depreciation of S$7.6m from fair value uplifts following the consolidation of UIC and the accelerated depreciation charge of (S$6.6m) from Pan Pacific Orchard which was closed for redevelopment from 2Q18.
Higher revenue from Hotels led by acquisitions, offset by lower property development and property investments. Excluding the impact of the consolidation of UIC, UOL recorded lower revenue from property development (-7% y-o-y) following the completion of Riverbank@Fernvale in Mar17, and property investments (-4% y-o-y). The latter was due to lower revenue from OneKM mall, mitigated by higher revenue from hotel operations (+9%) following contributions from newly acquired Pan Pacific Melbourne in Jul17.
Gross margins higher at 35%. Gross margins were higher at 35% vs 33% in 1Q17, led by higher contributions from property investments which have higher margins.

Good sales momentum on completed projects. In Singapore, UOL continued to record good sales momentum on completed projects such as V on Shenton (85.3% sold in 1Q18 vs 73.4% in 4Q17) and Mon Jervois (74.3% sold in 1Q18 vs 63.7% in 4Q17) while sales activity was low at Principal Garden (99.2% sold as at 1Q18), Clement Canopy (84%), and Pollen & Bleu (75.5%). In China, sales at Park Eleven, Shanghai (36.7% sold as at 1Q18) and The Excellency, Chengdu (99.2%) were relatively flat q-o-q.
Amber45 - 69% sold at ASP of S$2,200psf (vs breakeven of S$1,500psf) over the weekend. We understand that the 139-unit Amber45 which was officially launched over the weekend sold some 69% of released units at an average price of S$2,200 psf. The estimated breakeven for this development is S$1,500psf. Units sold were mostly smaller units while some 20% of the larger units have yet to be released.
Tre Ver (ex-Raintree Gardens) expected to launch in 3Q18.
Upcoming launches include
1. Tre Ver (ex-Raintree Gardens) is expected to launch in 3Q18,
2. Park Eleven phase 2 in 2H18,
3. One Bishopsgate Place in 3Q18.
Nanak Mansions is targeted to be launched in 2019 while UOL has yet to be officially awarded the Silat Avenue site.

RevPAR growth of 2% to 8% across the portfolio. RevPAR growth was encouraging at 2% to 8% across the portfolio. Looking ahead, the group continues to look for opportunities to expand its hotel portfolio in existing markets and new markets such as Jakarta and Bangkok.

While office spot rents have increased y-o-y, UOL’s commercial properties are still recording negative rental reversions but this is bottoming out.

We maintain our BUY rating on UOL on its attractive valuation of c.0.8x P/NAV.
As the earliest to landbank at a lower price, UOL stands to benefit from the improved sentiment in the Singapore property segment as evident from its first launch this year, Amber45.
The turnaround in the hospitality segment bodes well for UOL’s hotel properties, and now with UIC’s hotel properties.

Derek TAN DBS Vickers | Rachel TAN DBS Vickers | https://www.dbsvickers.com/ 2018-05-14

SGX Stock Analyst Report BUY Maintain BUY 10.230 Same 10.230