UOL Group - OCBC Investment 2021-08-13: Residential The Bright Spot


UOL Group - Residential The Bright Spot

  • UOL's 1H21 core PATMI rose 4.4% y-o-y to S$108.2m.
  • Resilient performance from residential segment, while weakness seen in others.
  • Portfolio rejuvenation on track.

UOL's 1H21 results below our expectations

  • UOL Group (SGX:U14)’s 1H21 results missed our expectations. Group revenue jumped 31.4% y-o-y to S$1,193.5m but gross profit increased at a smaller pace of 11.1% to S$381.4m due to margin compression (-5.8 percentage points (ppt) to 32.0%). PATMI reversed from a net loss of S$82.1m in 1H20 to S$91.3m in 1H21.
  • After adjusting for fair value losses on investment properties, UOL's core PATMI rose 4.4% y-o-y to S$108.2m, and this formed 31.9% of our initial FY21F forecast.

Weaker operating metrics for its investment properties and hotels portfolio

  • UOL’s property development segment saw brisk sales in Singapore given the buoyant residential market. Its Clavon, Avenue South Residence and MEYER HOUSE projects have been 88%, 75% and 50% sold, respectively.
  • UOL recently replenished its Singapore residential landbank with the award of a government land sales site at Ang Mo Kio Avenue 1 at S$381.4m, or S$1,118 psf ppr, via a joint venture. It will reopen its showflat for The Watergardens at Canberra project ove r the weekend.
  • On the other hand, there was weakness seen at UOL’s investment properties and hotels portfolio. Committed occupancy for its retail portfolio fell 4.3 ppt to 90.6% as compared to end-2020, with the drag coming from Marina Square and KINEX. Rental reversions were slightly negative, but the decline has narrowed and management is hoping for a rebound next year. There were also slight dips in committed occupancies for its office properties in Singapore and UK.
  • Adjusted EBITDA for UOL's hotel operations (excluding JVs and associates) was positive at S$4.1m in 1H21, but represented a decline of 78.5% y-o-y. RevPAR for Singapore, Oceania and Others fell 40%, 1% and 3% y-o-y, respectively, in 1H21.

Portfolio rejuvenation underway

UOL Group - ESG Updates

  • UOL has displayed consistent solid ESG performance.
  • UOL continues to outperform its peers by demonstrating a comprehensive health and safety management system, which includes a group-wide policy and a zero-incident target for all its development projects. UOL has also adopted energy and water efficiency programmes, and aims to attain “Green Mark Gold” certifications for its new development projects.
  • For the ‘Corporate Governance’ category, UOL falls into the average scoring range as compared to its global peers.

OCBC Research Team OCBC Investment Research | 2021-08-13
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