UOL Group - OCBC Investment 2019-11-13: Firm Sales Momentum


UOL Group - Firm Sales Momentum

  • UOL's 3Q19 core PATMI -6.6% y-o-y.
  • Healthy demand for Singapore projects.
  • Still evaluating options for Marina Centre Holdings (MCH).

3Q19 results within our expectations

  • UOL GROUP (SGX:U14) reported its 3Q19 results which met our expectations. Group revenue fell 9.5% y-o-y to S$476.6m due to lower progressive recognition from development projects, coupled with a 3% decline in Hotel operations, which was in turn driven by lower occupancy and room rates from some of its properties. Core PATMI correspondingly slipped 6.6% y-o-y to S$80.0m. See UOL Group Announcements.
  • On a 9M19 basis, UOL’s revenue decreased 5.4% to S$1,730.1m, but core PATMI increased 5.9% to S$276.0m. This formed 75.8% of our FY19 forecast.

Healthy take-up rates and robust ASPs for SG residential projects

  • According to management, after taking into account bookings received post 3Q19, its Amber45 and The Tre Ver projects are now 80% and 86% sold.
  • Avenue South Residence, which was only launched in Sep this year and a beneficiary of the government’s Greater Southern Waterfront initiatives, has already sold 39% of its 1,074 units. Based on data from URA REALIS, average ASP was healthy at ~S$1,955 psf, higher than our initial expectations.
  • MEYER HOUSE, which was launched in May, has seen only five transactions, or 9% out of the 56 units available for sale. However, TOP is only expected in 3Q21. UOL sounded upbeat about meeting its ABSD deadlines for its projects, and highlighted that there was improved buyer sentiment on the ground.

Continues to reposition its malls; evaluating options at MCH

  • UOL’s Singapore office portfolio has seen healthy take-up rates, but management alluded that sentiment appears to be softening, which was in-line with what we heard from most of the office REITs. While rental reversions were at positive mid-single digit across its office portfolio, this is expected to moderate to flat reversions ahead.
  • For retail, Velocity@Novena Square shopping mall and United Square continued to perform strongly, while KINEX (negative rental reversion) and Marina Square have made progress from their repositioning, but would still take time to see the positive effects.
  • As for the potential rejuvenation of Marina Centre Holdings (MCH), UOL is still continuing its discussions with the authorities and will evaluate its options.
  • We raise our ASP assumptions for UOL’s Singapore residential projects, incorporate its Clementi Avenue 1 site in our model and also apply a lower RNAV discount of 30% (previously 35%). This is to account for the better-than-expected performance of the Singapore residential market and UOL’s continued balance sheet strength.
  • Our fair value is bumped up to S$9.25 from S$8.50. See UOL Group Share Price; UOL Group Target Price.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-11-13
SGX Stock Analyst Report BUY MAINTAIN BUY 9.25 UP 8.500