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.