UOL Group - CGS-CIMB Research 2020-08-13: Challenging Operating Conditions


UOL Group - Challenging Operating Conditions

  • UOL Group's 1H20 EPS was -9.7 Scts, impacted by revaluation deficit and lower operating performance.
  • Planned roll out of Clavon in 4Q20 extends residential earnings visibility.
  • Reiterate ADD with a higher Target Price of S$7.29, based on a 40% discount to RNAV.

UOL Group's 1H20 results highlights

  • UOL Group (SGX:U14) reported 1H20 after-tax and minorities loss of S$82.1, due mainly to S$263.8m fair value loss on investment properties. Excluding this, core PATMI would have been S$103.6m, down 37% y-o-y. 1H20 revenue declined 28% y-o-y, due mainly to lower hotel and property development revenue, partly offset by higher technology and management services revenue.
  • UOL Group's balance sheet remains healthy, with net debt to equity of 0.32x, and gross cash and unutilised credit facilities of c.S$3.9bn as at end-1H20.

Residential sales still moving

  • Property development revenue declined 29% y-o-y in 1H20 to S$379.7m with recognition from Avenue South Residence and The Tre Ver. Avenue South Residence is currently about 50% taken up while The Tre Ver is 97% sold to date. Meanwhile, ongoing developments such as Amber 45 has seen a slight uptick in sales rate to c.88%.
  • UOL Group plans to launch Clavon at Clementi Ave 1 in 4Q20. Its recently won 448-unit residential plot at Canberra Drive is slated to be marketed in 2021F. We expect this to underpin the group’s residential earnings visibility.

Stable committed occupancy for investment property portfolio

  • While investment property revenue declined 14% y-o-y in 1H20, impacted by rental rebates to tenants, retail committed occupancy remained relatively stable at 94-95%. Shopper patronage in 1H20 was about 42% lower than in 1H19, although traffic was recovering steadily in Jun 2020.
  • Office take up was at 94-95% in Singapore and UK and 100% in Australia. UOL Group has a remaining 8% of office NLA and 16% of retail NLA to be renewed in the remainder of FY20F.

Hotel performance adversely impacted by COVID-19

  • Hotel revenue declined 57% y-o-y in 1H20 due to lockdowns and travel restrictions. Hotel portfolio occupancy ranged 29-61% while revenue per available room (RevPar) across its geographies declined 42-59% y-o-y in 1H20. In addition, the closure of Parkroyal Collection Marina Bay and Parkroyal Kuala Lumpur for major refurbishments and the divestment of pan Pacific Suzhou also impacted bottomline.
  • While recovery remains uncertain in the near term, management indicated that domestic travel in Australia and China as well as the staycation business in Singapore may help with near-term prospects.

Reiterate ADD rating

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-08-13
SGX Stock Analyst Report ADD MAINTAIN ADD 7.29 UP 7.250