UOL GROUP LIMITED (SGX:U14)
UOL Group - Darkest Before Dawn
- UOL Group's 1H20 net loss was S$82m vs net profit of S$267.7m in 1H19, mainly due to Fair Value losses. Ex-Fair Value losses, net profit was S$103.6m (-37% y-o-y).
- Residential sales were steady (majority projects are > 50% sold) in 1H20 despite Circuit Breaker, demand progressively resuming.
- Launch of Clavon at Clementi Avenue 1 delayed to 4Q20.
- Key highlights:
- reviewing redevelopment plans and amend according to market changes post COVID-19;
- good demand for staycation business especially during weekends,
- shopper traffic back to 50% of pre-COVID levels despite slower retail sales.
1H20 recorded net loss due to fair value losses; 2% valuation decline vs FY19
- UOL Group (SGX:U14)'s 1H20 net loss was S$82m vs S$267.7m net profit in 1H19, mainly due to fair value losses of S$264m from investment properties including retail malls and serviced suites which were impacted by COVID-19 pandemic.
- Excluding fair value losses, UOL recorded 1H20 net profit of S$103.6m, -37% y-o-y, vs S$164m in 1H19. This is in line with lower revenue from all segments except management services and technologies.
- UOL's 1H20 revenue fell 28% y-o-y with all segments impacted by COVID-19 except management services and technologies.
- Hospitality segment was the most affected; revenue fell 57% y-o-y with Singapore and Australia hotel portfolios recording the largest declines, and absence of contribution following the closure of PARKROYAL COLLECTION Marina Bay and PARKROYAL KL for major refurbishments and divestment of Pan Pacific Suzhou.
- Revenue from property development fell 29% y-o-y to S$380m mainly due to lower revenue from Park Eleven, Shanghai, offset by progressive revenue recognition from Avenue South Residences and The Tre Ver.
- Revenue from property investments fell 14% y-o-y mainly due to rental rebates of S$26.3m extended to tenants affected by COVID-19. However, these were partially offset by government grants and assistance of S$25.5m recorded in Other Income.
- Gross margins fell to 38% in 1H20 vs 45% in 1H19 as businesses were impacted by COVID-19.
- Gearing remains healthy at 0.32 vs 0.28 in 1H2019. Average cost of debt has fallen to 1.66% vs 2.29% in FY19.
- Following the fair value losses recognized, representing 2% decline in value as at FY19, UOL's NAV accordingly declined by 5% to S$11.34 per share vs S$11.91 per share.
- Valuation decline was mainly due to rents and vacancies assumptions while cap rates were stable.
Outlook
Residential – Most projects have booked in > 50% sales; sales have been healthy and steady despite the challenging situation
- In 1H20, UOL achieved sales volume of 148 units, -55% y-o-y. We note 63 units were sold (-26% q-o-q) in 2Q20 despite the Circuit Breaker. Sales were mainly recorded from Avenue South Residence and The Tre Ver.
- It was interesting to note that while property sales fell substantially in the month of Apr20 mainly due to the Circuit Breaker, we saw a healthy recovery in May and Jun 20. To-date, Avenue South Residence has sold 543 units, crossing the 50% mark while The Tre Ver and Amber45 recorded 97% and 88% of units sold respectively.
- Launch of Clavon at Clementi Avenue 1 has been delayed to 4Q20 (vs 3Q20 previously) due to COVID-19. Management remains confident on sales of the project and believe that mass market residential developments will continue to do well. The Canberra Drive site which was awarded in Mar20 is expected to be launched in 2021.
- In the UK, The Sky Residences at One Bishopsgate Plaza has booked in 21.9% sales (vs 18% as at end Dec19). The project is expected to complete in 1H2021.
- As restrictions are progressively lifted, construction activities have resumed with careful pacing. As such, this may cause potential delays in construction works. While UOL has locked in most construction contracts and costs, and do not foresee a significant increase in construction costs, management hopes for further extension of ABSD deadlines which would be helpful.
Commercial – stable occupancies and rental reversions; shopper footfall is 50% of pre-COVID levels while retail sales remain slow; continually reviewing redevelopment plans with adjustment to changes in market conditions.
- Overall office and retail occupancies have remained relatively stable at 95% and 94% respectively and rental reversions remain flattish in 1H20.
- Shopper footfall at its retail portfolio has returned close to 50% of pre-COVID levels. However, retail sales are still slow.
- Management continues to review redevelopment opportunities such as KH KEA, Faber House and Marina Square with positive responses from the authorities. However, some planning parameters may change according to changes in the market conditions due to COVID-19.
Hotel – good demand from staycation business with close to 90% occupancy on some weekends
- Hospitality portfolio saw occupancies fall to 29% to 61% across the geographies in 1H20 vs 41% to 72% in 1Q20.
- RevPAR fell further to S$33 to S$102 in 1H20 vs S$47 to S$140 in 1Q20.
- Singapore hotels have been mainly supported by the SHN business and after the staycation business have resumed, management saw strong demand with close to 90% of occupancy on some weekends in 2 hotel properties in Beach Road that were open for staycations.
- See UOL Group Share Price; UOL Group Target Price; UOL Group Analyst Reports; UOL Group Dividend History; UOL Group Announcements; UOL Group Latest News.
Rachel TAN
DBS Group Research
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Derek TAN
DBS Research
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https://www.dbsvickers.com/
2020-08-14
SGX Stock
Analyst Report
8.400
SAME
8.400
