• Core PATMI up 16% YoY
• Likely to launch two condos in FY15
• FV estimate increased to S$7.97

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 Scents 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.

Source: OCBC Research - 27 Feb 2015