• 2Q17 PATMI up 59% YoY
• Expect stable performance ahead
• Raising FV estimate to S$9.01

Results Tracking Above Our Expectations

2Q17 PATMI increased 59% YoY to S$109.4m mainly due to higher recognition from Principal Garden, higher share of profits from associated companies and fair value gains on investment properties. In particular, we note that UOL booked S$9.2m in fair value gains over the latest quarter (mostly from Novena Square and United Square) versus S$21.5m of impairment losses in the same period last year.

In terms of the topline, 2Q17 revenues increased 10% YoY to S$399.1m as contributions from property development rose 19% YoY to S$221.2m. Contributions from the hospitality segment were mostly flat YoY at S$105.6m versus S$106.2m in 2Q16. We deem this set of results to be above expectations and excluding non-core items, 2H17 PATMI now constitutes 69% of our full year forecast.

Maintain BUY; FV Estimate Raised to S$9.01

We like that the group has continued to replenish their land-bank with discipline throughout the downturn and note that management has raised concern about a possible disconnect between the recent land tender prices and achievable end sale prices. On the overseas front, despite the uncertainties over Brexit, management expects stable performance from its assets in midtown London and is additionally developing One Bishopgate Plaza (150 Bishopsgate) besides Holborn Island and 110 High Holborn.

For its hospitality segment, UOL expects trading conditions in Asia Pacific to remain competitive amidst an uncertain economic outlook but highlighted that their recent acquisition of a hotel in Melbourne, which will be under the Pan Pacific branding, will further strengthen their presence in Australia. We update our valuation model for latest results and firmer assumptions and our fair value estimate rises to S$9.01 versus S$8.63 previously. Maintain BUY.

Source: OCBC Research - 8 Aug 2017