Although UE E&C’s 1Q13 revenue increased by 43% YoY to S$87.6m, its gross margin declined to 10.8% (1Q12: 15.4%), resulting in flat gross profit of S$9.5m. This was due to differences in the stage of construction at each project for the quarters under comparison. 1Q13 net profit was up 14% YoY to S$4.8m. With the Ascentia Sky project almost completed, we expect the group to focus more on the Austville Residences and Watercolours projects. UE E&C is expected to launch its Prince Charles and Punggol EC projects in 2H13. We continue to like UE E&C for its healthy order-book and conservative risk profile. Maintain BUY with an unchanged S$0.82 fair value estimate.
1Q13 net profit increased 14% YoY
Although UE E&C’s 1Q13 revenue increased by 43% YoY to S$87.6m, its gross margin declined to 10.8% (1Q12: 15.4%), resulting in flat gross profit of S$9.5m. This was due to differences in the stage of construction at each project for the quarters under comparison (more below). 1Q13 net profit was up 14% YoY to S$4.8m. The group also benefited from a fair value gain of its held-for-trading investments (1Q13: S$1.4m; 1Q12: S$0.8m), and higher contribution from associates (1Q13: S$0.9m; 1Q12: S$0.6m). Distribution and administrative expenses increased marginally by 3-5% YoY.
Construction margin fell to 7.1%
Construction revenue jumped 50% YoY to S$77.5m in 1Q13 (1Q12: S$51.7m), mainly due to higher contribution from projects such as Watercolours, Austville Residences, the National Continuing Education & Training Campus in Singapore, and the PMO Building in Brunei. However, construction gross margin fell to 7.1% in 1Q13 (1Q12: 12.1%) as several other projects (Prince Charles, Punggol EC) are still in the preparatory stages.
Two developments to be launched in 2H13
With the Ascentia Sky project almost completed, we expect the group to focus more on Austville Residences and Watercolours, which are almost fully sold. UE E&C is expected to launch its Prince Charles and Punggol EC projects in 2H13. The Prince Charles project is likely to feature a high-end development and we estimate its break-even price to be around S$1,450 psf. As a comparison, the nearly Echelon condominium is already >90% sold with median price of ~S$1,650 psf (for Apr-13). For the Punggol EC, we estimate an average selling price of S$740 psf versus an estimated break-even of S$650 psf.
Maintain BUY; unchanged FV of S$0.82
We continue to like UE E&C for its healthy order-book (estimated to be around S$650m) and conservative risk profile. Maintain BUY with an unchanged S$0.82 fair value estimate.
Although UE E&C’s 1Q13 revenue increased by 43% YoY to S$87.6m, its gross margin declined to 10.8% (1Q12: 15.4%), resulting in flat gross profit of S$9.5m. This was due to differences in the stage of construction at each project for the quarters under comparison (more below). 1Q13 net profit was up 14% YoY to S$4.8m. The group also benefited from a fair value gain of its held-for-trading investments (1Q13: S$1.4m; 1Q12: S$0.8m), and higher contribution from associates (1Q13: S$0.9m; 1Q12: S$0.6m). Distribution and administrative expenses increased marginally by 3-5% YoY.
Construction margin fell to 7.1%
Construction revenue jumped 50% YoY to S$77.5m in 1Q13 (1Q12: S$51.7m), mainly due to higher contribution from projects such as Watercolours, Austville Residences, the National Continuing Education & Training Campus in Singapore, and the PMO Building in Brunei. However, construction gross margin fell to 7.1% in 1Q13 (1Q12: 12.1%) as several other projects (Prince Charles, Punggol EC) are still in the preparatory stages.
Two developments to be launched in 2H13
With the Ascentia Sky project almost completed, we expect the group to focus more on Austville Residences and Watercolours, which are almost fully sold. UE E&C is expected to launch its Prince Charles and Punggol EC projects in 2H13. The Prince Charles project is likely to feature a high-end development and we estimate its break-even price to be around S$1,450 psf. As a comparison, the nearly Echelon condominium is already >90% sold with median price of ~S$1,650 psf (for Apr-13). For the Punggol EC, we estimate an average selling price of S$740 psf versus an estimated break-even of S$650 psf.
Maintain BUY; unchanged FV of S$0.82
We continue to like UE E&C for its healthy order-book (estimated to be around S$650m) and conservative risk profile. Maintain BUY with an unchanged S$0.82 fair value estimate.
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