UOL Group - CGS-CIMB Research 2019-02-26: Performance Masked By One-Offs


UOL Group - Performance Masked By One-Offs

  • UOL Group's FY18 core EPS of 37.8 Scts was below expectations at 74% of our forecast.
  • Two new residential launches planned for 2Q19.
  • Maintain ADD with an unchanged Target Price of S$8.45.

FY18 results highlights

  • UOL GROUP LIMITED (SGX:U14)’s reported FY18 net profit of S$433.7m was 51% lower y-o-y due to a high base in FY17 as a result of S$535.6m negative goodwill recognised on the consolidation of UNITED INDUSTRIAL CORP LTD (SGX:U06, UIC). Excluding this, and taking into account a full year’s consolidation of UIC’s contributions and net impairment charges on property, plant and equipment, core net profit came in at S$348.4m, down 1% y-o-y.
  • UOL Group proposed a final DPS of 17.5 Scts, unchanged y-o-y.

Residential contributions underpinned by China project

  • Residential revenue and profits were boosted by profit recognition from P1 of the Park Eleven project in Tianjin where 47 of the 156 pre-sold residential units were handed over. The remaining 109 units are expected to be handed over progressively in 2019. P2 and P3 of Park Eleven comprising 230 units are slated for launch this year, pending approval on selling prices.
  • We expect this project to generate attractive margins when monetised given its low land cost.

Launch of two new residential projects planned for 2Q19

  • In Singapore, The Clement Canopy and Botanique at Bartley are almost fully sold and recognised. Going forward, Singapore residential contributions will be underpinned by Amber 45 (68% sold as at end-Dec 18 at an ASP of S$2,344psf) and The Tre Ver (25% taken up at S$1,558psf).
  • UOL Group plans to launch MEYERHOUSE (former Nanak Mansion) and Avenue South Residence at Silat Avenue in 2Q19, totaling 1,130 units. The group continues to be selective in its landbanking strategy in Singapore.

Hospitality and investment property performance remain stable

  • Within its hospitality business, the group benefited from an improved outlook across its geographic footprint, with the exception of China and Myanmar. Portfolio Revpar grew by 2.7% y-o-y, led by Singapore which saw a 9.4% y-o-y rise.
  • Within the investment property portfolio, occupancies remained relatively stable while KINEX saw a lower occupancy of 84% due to ongoing asset enhancement works.

Maintain ADD

  • We adjust our FY19-20 EPS post results. Our RNAV is maintained at S$12.08 after adjusting for the higher Target Price of UOB (SGX:U11) and updating for the latest balance sheet. Accordingly, our Target Price is unchanged at S$8.45, pegged to a 30% discount to RNAV. See attached PDF report for UOL Group's RNAV breakdown.
  • Balance sheet remains healthy despite a higher net debt to equity ratio of 0.28x (vs. 0.21x at end-FY17).
  • Upside catalyst could come from accretive new investment opportunities.
  • Downside risks r-than-expected pace of residential launches and office market recovery.

LOCK Mun Yee CGS-CIMB Research | 2019-02-26
SGX Stock Analyst Report ADD MAINTAIN ADD 8.450 SAME 8.450