UOL GROUP LIMITED (SGX:U14)
UOL Group - Trying Times
- Residential sales moving; retail and hotel operations affected by Covid-19.
- End-1Q20 net gearing healthy at 0.3x with significant unused credit facilities.
- Reiterate ADD with a lower Target Price of S$7.25.
UOL's 1Q20 business update
- In its 1Q20 business update, UOL Group (SGX:U14) indicated that rental of its retail properties as well as hotel operations were adversely impacted by the Covid-19 outbreak while residential activities continued to see some take up. Its balance sheet remains healthy, with net debt to equity of 0.3x and unused credit facilities of S$3.2bn as at end-1Q20.
- UOL Group put in place cost management strategies including salary reductions of up to 18% for senior management w.e.f. 1 Apr 2020, deferred non-essential capex, and initiated operating cost reduction strategies across all asset classes.
Residential sales slowing, but still moving
- In 1Q20, UOL Group continued to sell another 85 residential units, mainly from Avenue South Residence (44% sold to date) and The Tre Ver (93% sold to date). Meanwhile ongoing developments such as Amber 45 saw a slight uptick in sales rate to 4% and MEYER HOUSE is now 12.5% taken up.
- UOL Group has delayed the launch of Clavon at Clementi Ave 1 to 4Q20 and has recently won a new 448-unit residential plot at Canberra Drive. Acquisition of the latter plot is slated to complete by mid-Jun 2020. We have pushed back contributions from Clavon as well as factored in impact from the Canberra Drive site in FY21F.
- In terms of impact from the Covid-19 circuit breaker, although sales activities have slowed, UOL Group has enhanced its digital marketing efforts to boost its virtual outreach.
- UOB (SGX:U11); UOB Share Price; UOB Target Price; UOB Analyst Reports; UOB Dividend History; UOB Announcements; UOB Latest News.
Retail and hotels operations adversely impacted by Covid-19
- While occupancy at its retail malls remained above 95%, shopper traffic dipped c12.4% y-o-y in 1Q20. With the temporary closure of non-essential businesses, only 25% of its retail tenants are operating during the circuit breaker period. To support its tenants, UOL Group has earmarked a total relief package of more than S$50m, including property tax rebates.
- Within its office portfolio, occupancies in Singapore, UK and Australia remained high at 95.2-100%. Meanwhile the revenue per available room (RevPar) for its portfolio of hotels declined 20-40% y-o-y in 1Q20, with hotels in Singapore and other parts of Asia under the most pressure, due to global travel restrictions. In Singapore and Australia, its hotels and serviced suites benefited from demand from housing returnees, foreign workers and healthcare workers.
- UOL Group's China hotels, have reopened and demand is slowly picking up.
Reiterate ADD rating
- We lower our FY20-21F EPS by 3-22% after factoring in lower hotel and rental profits as well as lower a Target Price for UOB, partly offset by contributions from new land acquisition. Accordingly, our RNAV is reduced to S$12.09 and our Target Price to S$7.25 (still based on 40% discount to RNAV). See UOL Group's RNAV details in PDF report attached below.
- See UOL Group Share Price; UOL Group Target Price; UOL Group Analyst Reports; UOL Group Dividend History; UOL Group Announcements; UOL Group Latest News.
- We continue to like UOL Group for its diversified business model with a high proportion of recurring income.
- Re-rating catalyst could come from a faster-than-projected recovery of its hotel operations.
- Downside risks: slower-than-expected pace of residential sales.
LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-05-18
SGX Stock
Analyst Report
7.25
DOWN
7.480
