• 3Q14 results marginally above
• Decent launch at 70 St. Patrick's
• Raising FV estimate to S$7.18

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-thananticipated 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).

Source: OCBC Research - 13 Nov 2014