• Impacted by softer gross margins
• Healthy topline across segments
• Two resi domestic launches ahead

Weaker earnings mostly in line with expectations

UOL’s 3Q16 PATMI decreased 14% YoY to S$87m primarily because of lower gross profit margins and weaker contributions from joint venture companies, which dipped as the Archipelago and Thomson Three projects attained TOP in Sep 2015 and May 2016, respectively. That said, group revenue for the quarter increased 11% YoY to S$393m as we saw broadly higher topline contributions across UOL’s property development, hotels and property investments segments. In particular, property development revenues increased 19% YoY to S$207m due to higher progressive revenue recognition from Riverbank@Fernvale, Botanique at Bartley and Principal Garden.

The hotel segment similarly reported higher revenues, which increased 4% YoY to S$110m, due to stronger performance from Pan Pacific Tianjin, Parkroyal Penang and Parkroyal Paramatta. 9M16 PATMI now constitutes 71% of our full year forecast and we judge these results to be broadly in line with expectations.

Two residential launches in Clementi and Potong Pasir ahead

Looking ahead, the group is targeting to launch two new developments in Clementi and Potong Pasir in 2017/18. The Clement Canopy is a 505- unit development in Clementi in which the group holds a 50% stake in and is likely to be launched in 1Q17. Raintree Gardens in Potong Pasir, which UOL recently acquired through an en-bloc tender with JV partner UIC Ltd, would also be redeveloped into a 750-unit condominium to be launched in 2018. Previously launched domestic projects, the 663-unit Principal Garden, 797-unit Botanique at Bartley and 555-unit Riverbank@Fernvale, are 43%, 96% and 78% sold, respectively. In China, the group has sold 131 units out of the 168 units launched in Park Eleven, Shanghai, and expects to launch the second phase in 1H17 while the residential units at the Esplanade, Tianjin, are fully sold with one office tower being 81% sold. In London, UOL is currently seeking planning approval for the intensification of its site in Bishopsgate to 160 residential units and 237 hotel rooms. Maintain BUY with an unchanged fair value estimate of S$7.30.

Source: OCBC Research - 16 Nov 2016