UOL

OCBC on 13 Aug 2012

UOL’s 2Q12 PATMI came in at S$171.7m, down 19% YoY mostly due to lower income from property development and higher marketing expenses. Excluding one-time gains, we estimate core PATMI at S$93.7m - in line with our expectations and 1H12 core PATMI now makes up 49% of our FY12 forecast. HDB has awarded the Bright Hill site to the UOL/ Singapore Land JV, and management believes that ASPs of S$1.3k-S$1.4k are achievable. Looking forward, the group indicated they would favor land-bank in the mid-tier space, away from the mass-market sector which is overcrowded in their view. We like that management has managed to secure more land-bank; UOL’s limited exposure to a still healthy mass-market segment, however, points to a lack of catalysts in 2H12. Maintain HOLD with a higher fair value estimate of S$5.26 (30% RNAV disc.), from S$4.80 previously, as we update valuations of listed holdings and for the recent land acquisition.

2Q12 earnings in line
UOL’s 2Q12 PATMI came in at S$171.7m, down 19% YoY mostly due to lower income from property development and higher marketing expenses. Excluding one-time gains, we estimate core PATMI at S$93.7m - in line with our expectations and 1H12 core PATMI now makes up 49% of our FY12 forecast. Topline for the quarter is S$298.8m – falling 34% YoY due to several projects attaining TOP in 2011 and 1Q12, and lower dividend income from UOB (no special dividends in 2Q12).

Likely to shy away from mass-market sites ahead
HDB has awarded the Bright Hill site to the UOL/ Singapore Land JV, and management believes that average selling prices of S$1.3k-S$1.4k psf are achievable. The en-bloc purchase of the St. Patrick Rd site was completed in Jul 12 and the development would likely launch in 2013. Looking forward, UOL indicated they would favor land-bank in the mid-tier space, away from the mass-market sector which is overcrowded in their view. In the overseas segments, the Changfeng (Shanghai) development is slated for launch in 2013. In addition, the group is reviewing plans for the Jalan Conley site and applying for the title to be changed from residential to commercial.

Steady numbers from the hotel segment
The hotel segment also put up steady numbers for the quarter as we saw an 6% increase in RevPar, though revenues from hotel ownership only climbed 2% YoY due to refurbishment activities. For the Upper Pickering site, the office segment is likely to attain TOP over Aug-Sep 12, with the hotel soon after that.

Maintain HOLD with higher S$5.26 FV estimate
We like that management has managed to secure more land-bank; UOL’s limited exposure to a still healthy mass-market segment, however, points to a lack of catalysts in 2H12. Maintain HOLD with a higher fair value estimate of S$5.26 (30% RNAV disc.), from S$4.80 previously, as we update valuations of listed holdings and for the recent land acquisition.