UOL Group

OCBC on 13 Aug 2015

2Q15 PATMI decreased 28% YoY to S$152.5m mostly due to lower fair value gains on the group’s investment properties and higher marketing and distribution costs, partially offset by stronger contributions from progressive recognition from development sales. Overall, we deem this quarter’s earnings to be in line with expectations and 1H15 core PATMI now makes up 48% of our full year forecast. UOL’s 797-unit condominium project has had a decent sell-through rate and is now 63% sold and we understand that the group will continue to be selective in replenishing its land-bank in the uncertain domestic residential market. Our fair value estimate dips to S$7.43 (versus S$7.97 previously) on the weaker outlook for its investment assets. Upgrade to BUY on valuation grounds.

2Q15 PATMI down mainly due to lower FV gains
2Q15 PATMI decreased 28% YoY to S$152.5m mostly due to lower fair value gains on the group’s investment properties and higher marketing and distribution costs (sales launch at Botanique at Bartley, ongoing sales at Seventy St Patrick’s, and expenses for OneKM and Pan Pacific Tianjin), partially offset by stronger contributions from progressive recognition from development sales (Katong Regency, Riverbank@Fernvale and Seventy St Patrick’s). 
Overall, we deem this quarter’s earnings to be in line with expectations and 1H15 core PATMI now makes up 48% of our full year forecast. Topline over the quarter increased 60% YoY to S$342.2m from S$213.6m in 2Q14 with increased revenues from property development and contributions on OneKM Mall which opened in 4Q14, partially offset by lower revenues from the hotel segment which saw revenues ease 6% to S$98.6m. 

Cautious tone on hotel and rental outlook
Management struck a cautious tone regarding the outlook for its hotel segment; in particular, the group expects Singapore room rates to be dampened by slowing visitor arrivals and an increase in supply ahead. Rentals for its investment properties are also likely to face headwinds given the significant office supply anticipated next year and rising vacancies and increased supply in the retail space. UOL’s 797-unit condominium project has had a decent sell-through rate and is now 63% sold and we understand that the group will continue to be selective in replenishing its land-bank in the uncertain domestic residential market. As at end 2Q15, net gearing improved to 31% from 34% as at end Dec 2014. Our fair value estimate dips to S$7.43 (versus S$7.97 previously) on the weaker outlook for its investment assets. Upgrade to BUY on valuation grounds.

UOL

OCBC on 13 May 2015

UOL announced that its 1Q15 PATMI decreased 39% YoY to S$74.2m mainly due to the absence of a one-time S$44.3m divestment gain from the sale of a land site at Jalan Conley, Malaysia, which was recognized in 1Q14. Excluding the Jalan Conley gain, 1Q15 adjusted PATMI would have decreased a smaller 3% YoY. Overall, we judge 1Q15 numbers to be within expectations and 1Q15 PATMI now constitute 19% of our full year forecast. The recent launch at the 797-unit condominium project, The Botanique, has been fairly successful, with 302 units sold to date at an average price of S$1290 psf out of the 550 units released. We understand that the development at Prince Charles Crescent would likely be launched in 2H15, and management will continue to be selective in replenishing its land-bank in the uncertain domestic residential market. Maintain HOLD with an unchanged fair value estimate of S$7.97.

1Q15 profit declined YoY due to absence of one-time gain
UOL announced that its 1Q15 PATMI decreased 39% YoY to S$74.2m mainly due to the absence of a one-time S$44.3m divestment gain from the sale of a land site at Jalan Conley, Malaysia, which was recognized in 1Q14, and higher finance costs from unrealized foreign currency losses in 1Q15 from USD borrowings for its Chinese investments. This was partially offset by lower marketing and distribution costs and higher share of profits from JV/associates over the latest quarter. Excluding the gain from Jalan Conley, 1Q15 adjusted PATMI would have decreased a smaller 3% YoY. In terms of the topline, 1Q15 revenues similarly declined 42% YoY to S$238.3m mostly due to the effect of the Jalan Conley divestment, partially offset by increased contributions from the property development segment. Overall, we judge 1Q15 numbers to be within expectations and 1Q15 PATMI now constitute 19% of our full year forecast. 

Firm performance at Botanique condo launch
The recent launch at the 797-unit condominium project, The Botanique, has been fairly successful, with 302 units sold to date at an average price of S$1290 psf out of the 550 units released. We understand that the development at Prince Charles Crescent would likely be launched in 2H15, and the group will continue to be selective in replenishing its land-bank in the uncertain domestic residential market. Management indicates that about 40% and 35%-40% of its office and retail portfolio, respectively, are up for lease renewal over the current year and expects to see positive rental reversions in the single digits. The group’s hotel portfolio faced some headwinds in 1Q15 with Revpar decline in the low single digits, as conditions in key markets remain difficult. Specifically, in Singapore, management indicates that the new supply of hotel rooms and weaker growth in tourist arrivals continue to weigh on performance and 1Q15 Revpar has dipped 8% - 10% YoY. Maintain HOLD with an unchanged fair value estimate of S$7.97.

UOL Group

OCBC on 27 Feb 2015

UOL’s FY14 PATMI decreased 13% YoY to S$686.0m mainly due to lower fair value gains on investment properties. Adjusted for one-time gains, core PATMI is S$397.7m which makes up 99% of our full year forecast and is in line with expectations. Recently launched projects, Riverbank@Fernvale and Seventy St. Patrick’s, are currently 50% and 73% sold, respectively, which we deem to be respectable performances given muted conditions in the domestic residential market. Management continues to see positive rental reversions (offices: 2.5%; retail: 5.6%) across its investment portfolio and the group’s new retail mall, OneKM, is currently 88% occupied with average rentals at S$12.50 - S$13 psf. Pan Pacific Hotels Group also reported 4% higher RevPar at S$138 and opened two new hotels in Nay Pyi Taw, Myanmar (ParkRoyal) and Tianjin, China (Pan Pacific) over FY14. We update our valuation model and our fair value estimate increases from S$7.18 to S$7.97. That said, given the rapid 11% run-up YTD, our rating is downgraded to HOLD on valuation grounds.

FY14 results within expectations
UOL’s FY14 PATMI decreased 13% YoY to S$686.0m mainly due to lower fair value gains on investment properties. Adjusted for one-time gains, core PATMI is S$397.7m which makes up 99% of our full year forecast and is in line with expectations. FY14 revenues rose 29% YoY to S$1,360.7m mostly due to the sale of land at Jalan Conley and the completion of the Esplanade project in Tianjin, offset by the absence of contributions from Waterbank at Dakota and Spottiswoode Residences which attained TOP in May-13 and Dec-13, respectively. A final cash dividend of 15.0 S-cents per share has been proposed. 

Poised to launch two projects in SG this year
Over FY14, the group sold 493 residential units, versus 666 units sold in FY13. Recently launched projects, Riverbank@Fernvale and Seventy St. Patrick’s, are currently 50% and 73% sold, respectively, which we deem to be respectable performances given muted conditions in the domestic residential market. Looking ahead, the group will likely launch two projects in FY14, the 797-unit Botanique at Bartley and a 663-unit development at Prince Charles Crescent. Management continues to see positive rental reversions (offices: 2.5%; retail: 5.6%) across its investment portfolio and the new retail mall, OneKM, is currently 88% occupied with average rentals at S$12.50 - S$13 psf. Pan Pacific Hotels Group also reported 4% higher RevPar at S$138 and opened two new hotels in Nay Pyi Taw, Myanmar (ParkRoyal) and Tianjin, China (Pan Pacific) over FY14.

Downgrade to HOLD on valuation grounds
We understand that the group will continue its strategic direction of diversifying into overseas market and building up its investment portfolio, while staying nimble for suitable acquisitions in the domestic residential space. We update our valuation model and our fair value estimate increases from S$7.18 to S$7.97. That said, given the rapid 11% run-up YTD, our rating is downgraded to HOLD on valuation grounds.

UOL

OCBC on 13 Nov 2014

UOL reported 3Q14 PATMI of S$102.6m, which increased 9.6% YoY mostly due to higher share of profits from JV and associates (UIC, SingLand, and the Archipelago and Thomson Three projects), partially offset by higher marketing expenses and pre-opening costs for Pan Pacific Hotel and Serviced Suites Tianjin. We judge 3Q14 results to be marginally above expectations, driven by stronger-than-anticipated profit margins from the Esplanade. In Sep 2014, the group also launched Seventy St Patrick’s with 59% of total units sold as at end 3Q14, and we understand the Upper Paya Lebar condominium project will likely be launched in 1Q15 ahead. Maintain BUY on UOL. We update our model for latest valuations of listed holdings and project ASPs, and our fair value estimate rises from S$6.95 to S$7.18 (20% discount to RNAV).

3Q14 results marginally above expectations
UOL reported 3Q14 PATMI of S$102.6m, which increased 9.6% YoY mostly due to higher share of profits from JV and associates (UIC, SingLand, and the Archipelago and Thomson Three projects), partially offset by higher marketing expenses and pre-opening costs for Pan Pacific Hotel and Serviced Suites Tianjin. 3Q14 topline increased 65.6% YoY to S$433.5m as the Esplanade in Tianjin, China achieved TOP and hence full profit recognition over the quarter. Marketing and distribution expenses in 3Q14 increased 12.3% YoY to S$9.6m mainly due to showflat costs for the launches of Riverbank@Fernvale and Seventy St. Patrick’s while other operating expenses similarly rose 14.0% YoY to S$20.3m given pre-opening costs for Pan Pacific Hotel and Serviced Suites Tianjin. Finance expenses fell 32.5% YoY to S$5.3m from lower interest rates and increased capitalization of borrowing costs. We judge 3Q14 results to be marginally above expectations, driven by stronger-than-anticipated profit margins from the Esplanade. 

Raising FV estimate from S$6.95 to S$7.18
In Sep 2014, the group launched Seventy St Patrick’s and achieved a decent take-up rate with 59% of total units sold (110 sold out of 186 total units) as at end Sep 2014. The median price achieved was S$1.6k psf, which was in line with our expectations. The group had acquired three land sites over the year – two in Singapore at Upper Paya Lebar and Prince Charles Crescent and one in Bishopsgate, London – and we understand that the the Upper Paya Lebar condominium project will likely be launched in 1Q15. In addition, the One KM retail mall in Katong is expected to have its official opening on 30 Nov 2014. The group continues to hold a strong balance sheet with 35% gearing and S$276.1m in cash and bank balances. Maintain BUY on UOL. We update our model for latest valuations of listed holdings and project ASPs, and our fair value estimate rises from S$6.95 to S$7.18 (20% discount to RNAV).

Singapore Property

OCBC on 21 Aug 2014

Over the last week, the authorities highlighted their various plans to transform the Jurong Lake District into a key regional center and also announced a new Thomson-East Coast line (TEL) that will connect neighborhoods along the East Coast stretch to the MRT grid. We believe that these initiatives to further enhance the outer regions in terms of infrastructure and mix of use will underpin the long-term attractiveness and potential for appreciation of real estate in Singapore. In particular, we see the transformation of the Jurong Lake District to be positive for CapitaLand and CapitaMall Trust, which operates three large retail malls (IMM, J-Cube and Westgate) in the area with a combined retail NLA of 1.0m sq ft. We also highlight that UOL’s Seventy St. Patrick’s condominium project (~186 units), located near the upcoming Marine Terrace MRT station, is ready for launch and could benefit from the TEL announcement. We have BUY ratings on CapitaMall Trust and CapitaLand with fair value estimates of S$2.20 and S$3.79, respectively. We also have a BUY rating on UOL with a fair value estimate of S$6.95.

The transformation of the Jurong Lake District
During the National Day Rally last Sunday, PM Lee highlighted the Jurong Lake District as an area in Singapore which he planned to further transform. The new Jurong Lake Gardens will be formed by integrating the Chinese and Jurong Gardens and Jurong Lake Park, with an area size of more than 70 ha. The Jurong Lake District neighborhood will also see enhancements with the addition of more developments, such as a new Science Centre, which will be located near Chinese Garden MRT and expected to be ready by 2020. We believe the transformation of the Jurong Lake District will be positive for developers with real estate exposure in the area. In particular, we highlight that CapitaLand and CapitaMall Trust operates three large retail malls (IMM, J-Cube and Westgate) in the area. Together, these assets comprise a whopping 1.0m sq ft of operational retail net leasable area, and we believe the group finds significant synergies in positioning these three assets as a “3-in-1” retail proposition that caters for a wide range of shoppers in Singapore’s largest regional hub. We have BUY ratings on CapitaMall Trust and CapitaLand with fair value estimates of S$2.20 and S$3.79, respectively.

Improving MRT connectivity in the East Coast
The authorities also recently announced a new Thomson-East Coast line (TEL) that will connect the East Coast stretch to the MRT grid and significantly reduce travel times to the town area. We believe that the announcement of the TEL could trigger interest for residential assets in the area and would be beneficial to developers with projects ready for launch near the upcoming MRT stations. One potential beneficiary is CapitaLand’s upcoming Marine Blue project (~124 units; acquired for S$100.7m or S$1,056 psf GFA in 2011), which is near the planned Marine Parade MRT. UOL’s Seventy St. Patrick’s condominium project (~186 units), located near the upcoming Marine Terrace MRT station, is also ready for launch. UOL’s site was acquired through an en-bloc process for S$172m in Jul-12 and we estimate break even prices around S$1,250 psf. We have a BUY rating on UOL with a fair value estimate of S$6.95.

UOL

OCBC on 11 Aug 2014

UOL reported 2Q14 PATMI of S$211.7m, which decreased 51% YoY mostly due to lower fair value gains from investment properties at both the group level (down 75% to S$85.0m) and at associated companies (down 21% to S$52.5m), partially offset by higher share of profits from associated companies (up 56% to S$38.4m) with stronger contributions from Pan Pacific Singapore, Archipelago and Thomson Three. Excluding one-time items, we estimate 2H14 core PATMI at S$212.3m, which is judged to be within expectations and makes up 63.2% of our full year forecast. We understand from management that Seventy St. Patrick’s would likely be launched later this year, while its condo projects in Upper Paya Lebar and Prince Charles Crescent could come onto the market in FY15. Maintain BUY with an unchanged fair value estimate of S$6.95 (20% RNAV disc.).

2Q14 results within expectations
UOL reported 2Q14 PATMI of S$211.7m, which decreased 51% YoY mostly due to lower fair value gains from investment properties at both the group level (down 75% to S$85.0m) and at associated companies (down 21% to S$52.5m), partially offset by higher share of profits from associated companies (up 56% to S$38.4m) with stronger contributions from Pan Pacific Singapore, Archipelago and Thomson Three. Excluding one-time items, we estimate 2H14 core PATMI at S$212.3m, which is judged to be within expectations and makes up 63.2% of our full year forecast. In terms of the topline, 2Q14 revenue came in at S$213.6m, down 30% YoY given the absence of contributions from two projects, Waterbank at Dakota and Spottiswoode Residences, which achieved TOP in May-13 and Dec-13, respectively. 

Seventy St. Patrick’s condo ready for launch
For existing domestic residential projects that have been launched, Riverbank@Fernvale (555 total units) and Thomson Three (445 total units) are 42% and 91% sold, respectively, as at end Jun-14. We understand from management that Seventy St. Patrick’s would likely be launched later this year, while its condo projects in Upper Paya Lebar and Prince Charles Crescent could come onto the market in FY15. Management indicates that conditions in the domestic residential space continue to be difficult and they would replenish land-bank on a very selective basis.

One KM now ~90% pre-leased
The pre-commitment level at One KM, slated for a soft opening in 2H14, is now ~ 90% pre-leased, though management cautioned that it could take time for a new mall in that area to gain retail traction, amidst other headwinds such as labor shortage and rising costs as well. The group also reported broad-based RevPar growth across its hotel portfolio over 2Q14, though it noted that travel patterns ahead could be affected by rising geo-political tensions. Maintain BUY with an unchanged fair value estimate of S$6.95 (20% RNAV disc.).

UOL

OCBC on 8 May 2014

UOL’s 1Q14 PATMI came in at S$120.8m, up 69% YoY mostly due to a one-time divestment gain of its Malaysian Jalan Conley site which contributed S$44.3m. Adjusting for this, we estimate core PATMI at S$76.5m; this constitutes 23% of our full year estimates which we judge to be mostly in line with expectations. The 555-unit Riverbank@Fernvale, launched in 1Q14, is currently 41% sold, whereas the residential component of The Espanade in Tianjin China is now 98% sold (average selling price of RMB 18.6k psm). The group indicates that the housing sector in Singapore continues to face headwinds and they would likely adopt a wait-and-see stance in terms of launching Seventy St. Patrick’s this year. The pre-commitment level at One KM, slated for opening in Sep 2014, is now slightly above 80%. Maintain BUY with an unchanged fair value estimate of S$6.95 (20% RNAV disc.).

1Q14 figures broadly in line
UOL’s 1Q14 PATMI came in at S$120.8m, up 69% YoY mostly due to a one-time divestment of its Malaysian Jalan Conley site which contributed S$44.3m. Adjusting for this, we estimate core PATMI at S$76.5m; this constitutes 23% of our full year estimates which we judge to be mostly in line with expectations. In terms of the topline, 1Q overall revenues increased 65% YoY to S$408.8m, again similarly boosted by the sale of the Jalan Conley site in Malaysia. In addition, revenues from the hotel segment grew 8% YoY to S$107.2m, mainly due to contributions from ParkRoyal on Pickering which opened in Jan 2013.

Wait-and-see stance for the Seventy St. Patrick’s launch
The 555-unit Riverbank@Fernvale, launched in 1Q14, is currently 41% sold, whereas the residential component of The Espanade in Tianjin China is now 98% sold (average selling price of RMB 18.6k psm). The group indicates that the housing sector in Singapore continues to face headwinds and they would likely adopt a wait-and-see stance in terms of launching Seventy St. Patrick’s this year. Specifically, management pointed out that a potential catalyst for stronger demand for this project could be an announcement of an MRT station in its locality, and they could possibly time their launch in relation to that. We also note that the group now also plans to launch its Upper Paya Lebar project later this year while the Prince Charles Crescent site, won in a GLS tender in Apr 2013, will be launched in FY15.

Singapore 1Q RevPar growth in mid-single digits
Given residential uncertainties in Singapore, management will continue to focus on growing its recurring income businesses. The pre-commitment level at One KM, slated for opening in Sep-14, is now slightly above 80%. UOL reported that it was a firm quarter for its hotel in Singapore, with RevPar growing in the mid-single digits; in China, hotel performance in Xiamen improved while conditions in Suzhou remained challenging. Maintain BUY with an unchanged fair value estimate of S$6.95 (20% RNAV disc.).

UOL Group

OCBC on 3 Mar 2014

UOL reported 4Q13 PATMI of S$189.2m, down 59.2% mostly due to reduced fair value gains on investment properties and a smaller contribution from the property development segment. Excluding non-core items, FY13 core PATMI cumulates to S$344.2m, which makes up 100.0% of our full year forecast and is judged to be in line with expectations and slightly below consensus. In terms of the topline, FY13 revenue came in at S$1,058.6m, down 7.6% as the contribution from property development fell given that Terrene at Bukit Timah and Waterbank at Dakota achieved TOP in 1Q13 and 2Q13, respectively. The group proposed a total dividend of 20 S-cents, which includes a special dividend of 5 S-cents on top of the first and final dividend of 15 S-cents per share. Maintain BUY with a reduced fair value estimate of S$6.95 (20% RNAV disc.), versus S$7.16 previously, mostly due to lower valuations of listed holdings and softer ASPs in our model.

4Q13 figures generally within expectations
UOL reported 4Q13 PATMI of S$189.2m, down 59.2% mostly due to reduced fair value gains on investment properties and a smaller contribution from the property development segment. Excluding non-core items, FY13 core PATMI cumulates to S$344.2m, which makes up 100.0% of our full year forecast and is judged to be in line with expectations and slightly below consensus. In terms of the topline, FY13 revenue came in at S$1,058.6m, down 7.6% as the contribution from property development fell given that Terrene at Bukit Timah and Waterbank at Dakota achieved TOP in 1Q13 and 2Q13, respectively. The group proposed a total dividend of 20 S-cents, which includes a special dividend of 5 S-cents on top of the first and final dividend of 15 S-cents per share.

Difficult conditions in domestic residential space
UOL sold 578 and 88 residential units in Singapore and China, respectively, in FY13 with a total sales value of more than S$552m. Earlier this year, the group launched Riverbank@Fernvale and its sales performance was moderate; the 555-unit residential project saw more than 200 units sold at ASPs just north of S$1.0k psf. Previously launched 435-unit Thomson Three is ~78% sold with average selling prices of S$1.3k psf and Seventy St. Patrick’s (186 units) is to be launched in 2Q14. Management indicates that conditions in the domestic residential space continue to be difficult and they would replenish landbank on a very selective basis.

Focus on growing recurring income
Given residential uncertainties, management will continue to deploy capital into growing its recurring income businesses. Hotel RevPar generally grew across key markets in 2013 (Singapore and Southeast Asia up 22% and 12% to S$193 and S$101, respectively) while China saw a 9% dip to S$38. The pre-commitment level at One KM, slated for opening in Sep-14, is now ~ 80%. Maintain BUY with a reduced fair value estimate of S$6.95 (20% RNAV disc.), versus S$7.16 previously, mostly due to lower valuations of listed holdings and softer ASPs in our model.

UOL Group

OCBC on 11 Nov 2013

3Q13 PATMI increased 6% YoY to S$93.5m with higher contributions from ParkRoyal on Pickering and Pan Pacific Serviced Suites Beach Road (which opened in 1Q13 and 2Q13, respectively) and profits from JV companies. We judge these results to be mostly within expectations, and YTD core PATMI, adjusted for one-time items, now cumulates to 70% of our FY13 forecast. UOL is looking to launch both remaining domestic land bank sites (Sengkang West Way and St. Patrick’s Garden) as early as 1Q14 after a fairly successful launch at Thomson Three, which is now ~76% sold with ASPs just shy of S$1.4k psf. In addition, the group reports that it has now launched all four blocks of the Esplanade in Tianjin China, achieving a ~90% take-up rate, and its Jalan Conley project in Kuala Lumpur continues to be on target for its launch in 4Q13. Upgrade to BUY on valuation grounds with an unchanged fair value estimate of S$7.16 (20% RNAV disc.).

Steady numbers reported for 3Q13
3Q13 PATMI increased 6% YoY to S$93.5m with higher contributions from ParkRoyal on Pickering and Pan Pacific Serviced Suites Beach Road (which opened in 1Q13 and 2Q13, respectively) and profits from JV companies. We judge these results to be mostly within expectations, and YTD core PATMI, adjusted for one-time items, now cumulates to 70% of our FY13 forecast. 3Q12 topline was S$261.8m, down 6% YoY due to a decline in property development revenues as Double Bay Residences and Waterbank at Dakota achieved TOP in 3Q12 and 2Q13, respectively. This was partially offset by increasing revenues from hotel ownership and operation (up 15% YoY to S$105.2m) and property investments (up 12% YoY to S$46.6m).

Two residential launches expected in 1H14
For their domestic residential segment, the group is looking to launch both remaining domestic land bank sites (Sengkang West Way and St. Patrick’s Garden) as early as 1Q14 after a fairly successful launch at Thomson Three, which is now ~76% sold with ASPs just shy of S$1.4k psf. In terms of replenishing its land-bank ahead, we expect UOL to take an active yet fairly prudent stance ahead; management indicated that they remain ready to seize opportunities as land prices are expected to soften head with increasing uncertainties in the sector.

One KM now 70% pre-committed
Management reports that the pre-commitment at One KM, slated for opening in 3Q14, is now ~70% and they would like to achieve ~75% level by the end of FY13. In addition, the group reports that it has now launched all four blocks of the Esplanade in Tianjin China, achieving a ~90% take-up rate, and its Jalan Conley project in Kuala Lumpur, Malaysia continues to be on target for its launch in 4Q13. 

Upgrade to BUY on valuation grounds
Upgrade to BUY on valuation grounds with an unchanged fair value estimate of S$7.16 (20% RNAV disc.).

UOL

OCBC on 12 Aug 2013

UOL reported 2Q13 PATMI of S$431.4m which increased 151% YoY mostly due to fair value gains at Novena Square, United Square and Odeon Towers where valuation cap rates have compressed some 25 to 50 bps. Excluding fair value and other one-time gains, 1H13 attributable profit is an estimated S$164.4m which is broadly in line with our expectations – constituting 45% of OIR’s FY13 forecast of S$368.3m – but somewhat below the street’s view (41% of FY13 consensus of S$391.8m). For UOL’s residential strategy ahead, we see management remaining cautious and more likely to replenish land at the rate of sales or below, and capital deployment is likely to be focused on growing recurring income in investment and hospitality assets. To recap, UOL had made a cash offer of S$2.55 per share to delist PPHG and we understand that the exit offer is now unconditional with a closing date of 13 Aug 2013. Maintain HOLD with an unchanged fair value estimate of S$7.16 (20% RNAV disc.).

Results mostly in line after excluding fair value gains
UOL reported 2Q13 PATMI of S$431.4m which increased 151% YoY mostly due to fair value gains at Novena Square, United Square and Odeon Towers where valuation cap rates have compressed some 25 to 50 bps. Excluding fair value and other one-time gains, 1H13 attributable profit is an estimated S$164.4m which is broadly in line with our expectations – constituting 45% of OIR’s FY13 forecast of S$368.3m – but somewhat below the street’s view (41% of FY13 consensus of S$391.8m). UOL’s 1H13 topline cumulates to S$552.1m which is again broadly on target and forms 47% of our forecast of S$1,168.7m for FY13. 

More likely to replenish land-bank cautiously
For its residential strategy ahead, we see management remaining cautious and more likely to replenish land at the rate of sales or below. The group recently won a new GLS site at Sengkang West Way at S$262.1m which is expected to yield 550 homes. Future launches in 2H13 are Bright Hill (445 units) and St Patrick’s Garden (186 units) projects in 2H13. Management reports that it has launched three blocks (480 units) at the Esplanade in Tianjin China with about 80% of units sold. Its Jalan Conley project in Kuala Lumpur, Malaysia is on target to be launched in 4Q this year. 

Pan Pacific Hotel Group exit offer now unconditional
The direction of capital deployment ahead is likely to be focused on growing recurring income in investment and hospitality assets. To recap, UOL had made a cash offer of S$2.55 per share to delist PPHG and we understand that the exit offer is now unconditional with a closing date of 13 Aug 2013. Again, from our previous discussions with management, we continue to believe that material operating changes, i.e., a major re-structuring or REIT listing, are unlikely for these newly fully consolidated hotel assets. 

Maintain HOLD with unchanged S$7.16 fair value
Maintain HOLD with an unchanged fair value estimate of S$7.16 (20% RNAV disc.).

UOL

OCBC on 13 May 2013

UOL’s 1Q13 PATMI decreased 15% YoY to S$71.7m mostly due to a weak contribution from its hotel segment. 1Q earnings now make up 19% of our full-year forecast, which we judge to be generally within expectations and is tracking marginally below due to lumpy progress recognition at development projects. In addition, the group has made a cash offer of S$2.55 per share (9% premium over last transacted price) to delist PPHG (Pan Pacific Hotels Group), conditional on the shareholder approval. We see this as a sensible move which would consolidate the group’s hotel assets at a fairly reasonable price. That said, from our discussions with management, it appears unlikely that material operating changes, i.e., a major re-structuring or REIT listing, are in store for PPHG assets. Maintain HOLD with a higher fair value estimate of S$7.16 (20% RNAV disc.), versus S$6.01 previously, as we work into our valuation model higher prices of listed holdings and the Sengkang acquisition.

1Q13 PATMI down 15% at S$77.7m
UOL’s 1Q13 PATMI decreased 15% YoY to S$71.7m mostly due to a weak contribution from its hotel segment (listed hotel subsidiary PPHG saw its 1Q13 PATMI dip 45%% to S$9.5m). 1Q earnings now make up 19% of our full-year forecast, which we judge to be generally within expectations and is tracking marginally below due to lumpy progress recognition at development projects. 

Proposal to delist Pan Pacific Hotels Group
The group has made a cash offer of S$2.55 per share to delist PPHG (Pan Pacific Hotels Group), conditional on the shareholder approval. The offer price represents a 9% premium over PPHG’s last transacted price of S$2.34 and gives shareholders, in UOL’s view, a reasonable exit alternative which may not be available given low trading liquidity and free float (UOL owns 81.57% and UOB 7.99%). We see this as a sensible move which would consolidate the group’s hotel assets at a fairly reasonable price, given our estimated RNAV of S$2.80 for PPHG. That said, from our discussions with management, it appears unlikely that material operating changes, i.e., a major re-structuring or REIT listing, are in store.

Still cautious on residential sector
UOL remains cautious on the residential sector and are more likely to “replenish land” than to land-bank aggressively. Going forward, it looks to launch its Bright Hill (445 units) and St Patrick’s Garden (186 units) projects in 2H13. The group also recently won a new GLS site at Sengkang West Way at S$262.1m which is expected to yield 550 homes. In addition, UOL reports pre-commitment levels at the One KM mall to be around 55%.

Maintain HOLD with higher S$7.16 fair value
We see mid-term catalysts to be upcoming launches at Bright Hill and St. Patrick’s and see PPHG’s potential privatization as a mild positive for the stock. Maintain HOLD with a higher fair value estimate of S$7.16 (20% RNAV disc.), versus S$6.01 previously, as we work into our valuation model higher prices of listed holdings and the Sengkang acquisition.

UOL Group

CIMB RESEARCH on 4 March 2013

KEY issues discussed during the post-results investor luncheon that we hosted with UOL were its complicated group structure, the outlook for the commercial and hotel sectors and its capital deployment plans. We retain our view that UOL is now a much more investible stock.

We maintain our EPS estimates, target price basis of 20 per cent discount to RNAV (revalued net asset value) and "outperform" rating, with NTA (net tangible asset) growth from asset completions and the potential for a larger UOL/UIC (United Industrial Corp) entity being the near- and longer-term catalysts. Based on its valuations of 33 per cent discount to RNAV and 0.8x P/B, UOL offers a more attractive exposure to the Singapore commercial/hotel sectors than the S-Reits and its developer peers.

The main issues discussed at the luncheon with UOL were:

• management's constructive view of rents at its Novena and United Square, with FY13 lease renewals progressing well,
• its plans to remain a Singapore-focused entity with a strategy of building up its recurring income assets and
• its views on its stakes in UIC/SingLand and the longer-term plans for these core holdings.

The issues discussed reaffirm our view that asset valuations have room for growth. Some 46 per cent of United Square's leases will be up for renewal in FY13, with renewals in Q1 2013-Q3 2013 already largely firmed.

We believe that FY13 could still see some rental reversions, which will help push up book values.

UOL mentioned that it has been consistently enhancing its assets through redevelopments and AEIs (asset enhancement initiatives).

Left now are Odeon Towers and Faber House, unlikely candidates in our view. UOL has quietly deployed over $1 billion into recurring income assets and is looking for more in Singapore. The bulk of the capex has been committed. Its low net gearing of 0.28x leaves room for more acquisitions. UOL is likely to continue buying UIC shares in the market. The group (including Wee Cho Yaw-linked entities) now has a circa 49 per cent stake and will not be bound by the "creeping rule" (one per cent every six months) once it crosses 50 per cent.

OUTPERFORM

UOL Group

OCBC on 9 Nov 2012

UOL reported 3Q12 PATMI of S$87.8m, down 13% YoY mostly due to lower development profits and renovation works at Pan Pacific Singapore. We judge this set of results to be mostly within expectations and, excluding fair value and other gains, adjusted 9M12 PATMI cumulates to S$258.2m which makes up 74% of our annual FY12 forecast. This being so, we see the market likely taking a neutral view on 3Q numbers. We expect new residential launches at Bright Hill and St. Patrick Rd in 1H13, with Bright Hill likely to come first around Mar-Apr 2013. Management continues to execute well, and upcoming launches would be key catalysts for the share price over the mid-term. Maintain HOLD with a higher fair value estimate of S$5.48 (30% RNAV disc.), from S$5.26 previously mostly due to updated valuations of listed holdings.

3Q12 numbers within expectations
UOL reported 3Q12 PATMI of S$87.8m, down 13% YoY mostly due to lower development profits and renovation works at Pan Pacific Singapore. We judge this set of results to be mostly within expectations and, excluding fair value and other gains, adjusted 9M12 PATMI cumulates to S$258.2m which makes up 74% of our annual FY12 forecast. This being so, we see the market likely taking a neutral view on 3Q numbers. 3Q12 topline came in at S$277.7m – decreasing 33% YoY, again mainly due to lower development contributions and hotel refurbishments. 

Looking ahead: new launches at Bright Hill and St. Patrick Rd
We expect new residential launches at Bright Hill and St. Patrick Rd in 1H13, with Bright Hill likely to come first around Mar-Apr 2013. Management continues to seek land-bank actively; the up-coming GLS white site at Thomson/Irrawaddy Rd could be particularly attractive to UOL, given management’s skill-set in developing mixed projects and the site’s location in a familiar area. In the overseas segment, we also expect the Changfeng (Shanghai) development to launch in 2013.

Hotel segment holding up well
Revenues from the hotel ownership segment held up well over 3Q12 – falling 1% YoY to S$91.1m. UOL reports that the office tower for ParkRoyal on Pickering has been handed over to the tenant, and that refurbishment works at Pan Pacific Singapore and Pan Pacific Orchard has been completed. However, 3Q12 REVPAR for its Singapore hotels was mostly flat YoY which, along with similar data-points from other Singapore hotel operators, points to an increased likelihood for an inflection point in domestic REVPAR growth. 

Maintain HOLD with higher S$5.48 FV
Management continues to execute well and we see upcoming launches at Bright Hill and St Patrick Road as mid-term catalysts for the share price ahead. Maintain HOLD with a higher fair value estimate of S$5.48 (30% RNAV disc.), from S$5.26 previously mostly due to updated valuations of listed holdings.

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.

UOL Group

OCBC on 26 June 2012

We believe that mass-market prices would be underpinned by an environment of continued low rates and abundant liquidity in FY12, and favor developers with ample land-bank outside the central region (OCR). With only one domestic site in UOL’s land-bank currently, we believe that land acquisitions would now be key requirements for share price outperformance ahead. UOL’s management has a strong track record of timing the property cycle well with spot-on execution at launches and we think this is a key strength of the company. However, with limited exposure to a still healthy mass-market residential segment, we downgrade UOL to HOLD with an unchanged S$4.80 fair value estimate (30% discount to RNAV).

Land-banking key for share price outperformance
We believe that mass-market prices would be underpinned by an environment of continued low rates and abundant liquidity in FY12, and favor developers with ample land-bank outside the central region (OCR). With only one domestic site in UOL’s land-bank currently, we view land acquisitions to be key requirements for share price outperformance ahead. Management has indicated that they are actively looking out for acquisition opportunities and, with an ample supply of residential sites in the government land sales (GLS) programme, we see good odds that UOL would acquire new sites in the remainder of FY12.

Good execution at two key launches
Over the last six months, we saw UOL execute strongly on its two key residential launches in Singapore. The 577-unit Archipelago is now 70% sold at around S$1.0k-S$1.1k psf, and the 244-unit Katong Regency is fully sold. The remaining site in its landbank is a 137,561 sq ft freehold residential site at St. Patrick’s Road, acquired for S$172m in Dec 11, via an en-bloc transaction. In China, we expect the residential sales environment to remain challenging. We see a muted take-up rate for the Esplanade in Tianjin, and management is expected to take a tentative approach whereby it would first launch a limited number of units to test the market.

Downgrade to HOLD with unchanged S$4.80 FV
UOL has a strong track record of timing the property cycle well with spot-on execution at launches and we think this is a key strength of the company. Also, the group’s balance sheet is relatively healthy (cash S$334.2m and net gearing 33% as of end 1Q12) against potential macro-economic shocks from residual European uncertainties. However, we are cognizant that there is limited exposure to a still healthy mass-market residential segment for the remainder of FY12. Downgrade to HOLD with an unchanged S$4.80 fair value estimate (30% discount to RNAV).

UOL

OCBC on 14 May 2012

UOL reported 1Q12 PATMI of S$84.0m, down 63% YoY mostly due to reduced profits from the property development segment and from associates (after Nassim Park Residences’ TOP in 1Q11). This was broadly aligned with consensus and our estimates. 1Q12 top-line came in at S$297.7m, down 59% again mainly due to lower sales of development properties. Given limited land-bank, we believe UOL to be relatively sheltered from uncertainties in the domestic residential space ahead. The group’s balance sheet also remains healthy; cash is at S$334.2m and gearing at 33%. Upgrade to BUY with a marginally higher fair estimate of S$4.80 (30% RNAV discount), versus S$4.77 previously, mostly due to higher ASPs for Katong Regency.

Earnings within expectations
UOL reported 1Q12 PATMI of S$84.0m, down 63% YoY mostly due to reduced profits from the property development segment and from associates (after Nassim Park Residences’ TOP in 1Q11). This was broadly aligned with consensus and our estimates. 1Q12 top-line came in at S$297.7m, down 59% again mainly due to lower sales of development properties. Looking ahead, we would continue to see revenue recognition at Double Bay Residences, Waterbank, Terrene and Spottiswoode, while Archipelago is expected to come in over 2H12.

Sharp execution in the domestic residential segment
We saw good execution at UOL’s two main projects – the Archipelago and Katong Regency. The 577-unit Archipelago, which was less than 20% sold as of end FY11, is now more than two-thirds sold at relatively stable price levels (~S$1.0-1.1k psf). In addition, we also saw a strong launch at the 244-unit Katong Regency which is now mostly sold out. In its overseas segment, management indicates that conditions in China remain challenging, and that take-up rates would likely stay subdued with existing purchasing curbs. For the Esplanade in Tianjin, UOL expects to first launch a limited number of condominium units to gauge feedback and gather interest.

Hotel numbers stay strong
RevPar growth, on a blended basis across the portfolio, was around 16% YoY. 1Q12 revenue from the hotel ownership and operations segment increased 22% to S$96.8m, mostly due to the group’s hotels in Singapore, Australia, Malaysia and Yangon and the inclusion of revenues from ParkRoyal Melbourne Airport (acquired Apr 11).

Upgrade to BUY
Given limited land-bank, we believe UOL to be relatively sheltered from uncertainties in the domestic residential space ahead. The group’s balance sheet also remains healthy; cash is at S$334.2m and gearing at 33%. Upgrade to BUY with a marginally higher fair estimate of S$4.80 (30% RNAV discount), versus S$4.77 previously, mostly due to higher ASPs for Katong Regency.

UOL

OCBC on 27 Feb 2012


UOL reported FY11 PATMI of S$664m, down 12% YoY mostly due to lower fair value gains on investments properties of associated companies. Adjusting for one-time gains, FY11 PATMI was S$535m which came in very close to our estimates of S$538m but somewhat below consensus (S$562m). Management also declared total dividends of 15 S-cents (10 cents final, 5 cents special). The group’s outlook is mostly unchanged and our thesis continues to be that its limited land-bank would shelter it from residential uncertainty ahead. However, its share price has appreciated 20% since our last update; we are downgrading to HOLD as our fair value estimate remains intact at S$4.77 (30% discount to RNAV). We expect sales at the Lion City project and accretive land-banking to be key catalysts ahead.

4Q11 results mostly within expectations
UOL reported FY11 PATMI of S$664m, down 12% YoY mostly due to lower fair value gains on investments properties of associated companies. Adjusting for one-time gains, FY11 PATMI was S$535m which came in very close to our estimates of S$538m but somewhat below consensus (S$562m). FY11 topline came in at S$1,960m, up 45% YoY due to higher recognition of projects sold, added contributions from ParkRoyal Serviced Suites in KL from 4Q10 and ParkRoyal Melbourne Airport Hotel (acquired Apr11). The topline came in above our forecast of S$1,858m and that of consensus (S$1,789m). Management also declared dividends of 15 S-cents (10 cents final, 5 cents special).

Holding prices at the Archipelago
Sales at the Archipelago launched in Dec11 continue to be slower than we had hoped with ~160 units out of 577 units sold as of 24 Feb 12. Management indicated that they would be holding prices mostly firm (~S$1,000 psf) in order not to undercut previous buyers – a strategy we agree with but would imply the Archipelago could take longer to sell than we previously projected. Looking ahead, we expect the condominium units at the Lion City project and The Esplanade in Tianjin to launch in 2Q12.

Healthy numbers from hotels
We saw another set of positive results from the hotel segment as revenue increased 10% YoY to S$358m, boosted by contributions from the ParkRoyal Melbourne Airport Hotel (acquired Apr11). Except for North America, REVPAR increased broadly across the hotel portfolio.

Outlook mostly intact
UOL’s outlook is mostly unchanged and our thesis continues to be that its limited land-bank would shelter it from residential uncertainty ahead. Management indicated a cautious view of the market, which is reassuring in our view, and we expect a prudent stance to land acquisitions in FY12. However, its share price has appreciated 20% since our last update; we are downgrading to HOLD as our fair value estimate remains intact at S$4.77 (30% discount to RNAV). We expect sales at the Lion City project and accretive land-banking to be key catalysts ahead.