• Sold 484 homes in SG
• 15 S-cents final dividends
• Maintain BUY rating

No surprises in FY16 results

FY16 PATMI decreased 27% YoY to S$287.0m mainly due to lower gross margins, lower fair value gains on investment properties and lower share of profits from JV companies. In terms of the topline, FY16 revenues increased 13% to S$1,440.7m given stronger contributions across the group’s property developments (progressive recognition at Riverbank@Fernvale, Botanique at Bartley and Principal Garden), hotel operations (stronger demand for Australian hotels and at Pan Pacific Tianjin and completion of enhancement works at ParkRoyal Parramatta) and investment properties (acquisition of 100 Holborn in London in June 2016) segments. We judge these results to be broadly in line with expectations and note that the group also proposed a final dividend of 15 S-cents per share.

Sees demand for well-located projects

Looking ahead, management expects office and retail rents to face headwinds with substantial supply pressure, softer corporate demand and increased disruption from e-commerce. They also expect the outlook for the hospitality sector in Asia Pacific to be remain competitive given economic uncertainties. That said, despite similarly muted conditions in the domestic residential sector, the group sold a respectable 484 residential units in Singapore in 2016. Management indicates that, while they are of the view that existing property cooling measures may not be lifted over the near term, they see firm demand for projects with good locational and product attributes.

There was strong interest shown at The Clement Canopy, a 505-unit condominium at Clementi Avenue 1, which drew large crowds at a preview earlier this month, and the group also recently added two residential sites in its landbank, a freehold site at 45 Amber Road and an en-bloc site at Potong Pasir Ave 1.

We continue to like UOL’s shares at current levels given its undemanding valuation at 0.66x price-to-book and healthy balance sheet with 24% gearing ratio and S$301.5m cash. Maintain BUY with an unchanged fair value estimate of S$7.30.

Source: OCBC Research - 27 Feb 2017