UOL Group - CGS-CIMB Research 2019-05-10: Robust Operating Performance

UOL GROUP LIMITED (SGX:U14)

UOL Group - Robust Operating Performance

UOL GROUP LIMITED (SGX:U14)'s 1Q19 EPS of 8.59 Scts was broadly in line at 20% of our FY19 forecast.
Residential sales saw a good pick-up at The Tre Ver post 1Q.
Maintain ADD call with an unchanged Target Price of S$8.45.

UOL GROUP LIMITED (SGX:U14) reported 1Q19 net profit of S$72.4m, which was 5% lower y-o-y, due to accounting reversal or property development backlog arising from the Purchase Price Allocation exercise on the consolidation of UNITED INDUSTRIAL CORP LTD (SGX:U06) in 2017. Excluding this, net profit would have improved a healthy 27% y-o-y.
The 12% y-o-y jump in 1Q19 revenue was due to the recognition of residential contribution from Park Eleven in Shanghai during the quarter.

In Singapore, ongoing projects such as Amber 45 and The Tre Ver continue to enjoy healthy take-up. Amber 45 is now 75% sold while The Tre Ver is currently 73% taken up vs. a 35% sell-through rate at end-Mar 19. ASP for the latter has also inched up slightly to S$1,580psf.
Buying interest has picked up as most new projects in the area have already been launched and UOL Group looks to continue de-risking this project. The group plans to roll out the 56-unit MEYERHOUSE in Jun 19, followed by the 1074-unit Avenue South Residence towards end-Jun/early-Jul.
While market sentiment has improved, UOL Group is likely to continue to be selective in its landbanking strategy in Singapore.

Rental income rose 4% y-o-y, thanks to contributions from the newly acquired office property in Australia. In Singapore, its office and retail portfolio saw a flat to slight negative rental reversion amid high occupancy.
Within its hospitality business, Revpar in Singapore, China and Myanmar slipped, partly offset by a better performance in Australia, Vietnam and Malaysia.

The recent purchase by United Industrial Corp of the remaining stake in Marina Centre Holdings that it does not own, will enable the group to evaluate development/asset enhancement options for the Marina Square mixed retail/hotel site in the medium term. This would allow the group to potentially enhance the value of this land parcel in the longer run.

We leave our FY19-21 EPS estimates unchanged and maintain our Target Price of S$8.45, pegged at a 30% discount to RNAV. Gearing ratio stands at 0.26x as at end-1Q19.
Maintain our ADD rating.
Upside catalyst could come from more definitive plans for the Marina Square mixed development site.
Downside risks include slower-than-expected pace of residential launches and office market recovery.

LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-05-10

SGX Stock Analyst Report ADD MAINTAIN ADD 8.450 SAME 8.450