May 15, 2017

UOL reported a 4% rise in 1Q17 net profit to S$80.3m on a 6% increase in revenue to S$350.7m. Net profit was in line, making up 23% of our FY17F forecast.

The improvement came mainly from the residential segment while rental revenue saw a slight uptick. Hotel revenue remained relatively flat over the previous period as Singapore and Australia hospitality portfolios saw a marginal overall dip in Revpar, in tune with industry movements. Due to the skewed revenue mix towards lower-margin residential development activities, GP margin compressed slightly to 33%.

Residential revenue came largely from progressive billings from ongoing projects such as Principal Garden (55.4% sold), Botanique at Bartley (98.4% sold) and Riverbank (93.5% sold), while associate contributions were lifted slightly by maiden profits from The Clement Canopy (38.4% sold). Meanwhile, Park Eleven in Tianjin also saw 33.4% of its units sold at an ASP of RMB76,000psm.

Rental income was up a marginal 2% yoy with added income from 110 Holborn mitigating downward pressure on retail rents. Office rents held steady with increased tenant appetite, and the group has renewed over half its office leases expiring in FY17 to date.

Looking ahead, the group plans to launch its two remaining land plots at Amber Road and Raintree Gardens, totalling c.890 units, in 2018, extending residential earnings visibility. Completion and handover of P1 of Park Eleven in Tianjin would also mean full recognition of profits from presold units from FY18.

We continue to like UOL for its diversified business model and strong recurrent cashflow. Maintain BUY, TP S$7.96, based on 20% discount to RNAV. –CIMB

UOL closed at: S$7.090