UOL Group - OCBC Investment 2018-11-14: Don’t Worry, There’s Still Time


UOL Group - Don’t Worry, There’s Still Time

  • UOL's 3Q18 core PATMI rose 4.9% y-o-y.
  • Sales momentum chugging along.
  • Focus on growing its recurring income.

3Q18 results within our expectations

  • UOL reported its 3Q18 results which met our expectations. Group revenue slipped 2.6% y-o-y to S$523.8m.
  • Although PATMI dipped 84.8%% y-o-y to S$92.8m, this was attributed primarily to the negative goodwill arising from the consolidation of United Industrial Corp (SGX:U06) in 3Q17. Stripping this and other gains out, UOL’s core PATMI grew 4.9% y-o-y to S$92.8m.
  • On a 9M18 basis, UOL’s group revenue jumped 41.4% to S$1,820.3m. PATMI fell 62.5% to S$299.3m, but core PATMI was only down 3.0% to S$259.9m and this accounted for 73.2% of our FY18 forecast.

A measured approach towards property development segment

  • While UOL highlighted that the recent property cooling measures had negatively affected sentiment, it remains comfortable at the current run-rate of close to 70% and 30% sales for its Amber45 (six months after launch) and The Tre Ver projects (four months after launch), respectively. It still has more than three years before the ABSD penalties would kick in.
  • Looking ahead, UOL plans to launch both its freehold 92- 128 Meyer Road (56 units) and Silat Avenue sites (1,074 units) in 2Q19.
  • The recent announcement by the government on reshaping Sentosa and development plans for Pulau Brani to integrate them with the upcoming Greater Southern Waterfront project is a positive for UOL’s Silat Avenue project, in our view.

Seeking to strengthen its investment properties portfolio

  • UOL’s hotels RevPAR performance was mixed, with PARKROYAL on Kitchener Road, PARKROYAL Parramatta and Pan Pacific Melbourne being the outperformers.
  • For retail, rental reversions were positive for Velocity@Novena Square and United Square, flat for KINEX amid an ongoing repositioning exercise and negative for West Mall and Marina Square.
  • Its office portfolio performance was more robust, with healthy leasing momentum and occupancy rates.
  • UOL would seek to grow its recurring income streams, including in Australia, given the residential headwinds in Singapore.
  • We derive a revised RNAV estimate of S$12.94 after updating our lower fair value of S$28.80 for UOB (SGX:U11) (previously S$32.09). Applying an unchanged 35% discount, our fair value estimate for UOL moves from S$8.48 to S$8.41.

Wong Teck Ching Andy CFA OCBC Investment Research | 2018-11-14
SGX Stock Analyst Report BUY MAINTAIN BUY 8.41 DOWN 8.480