• FY17 results above expectations
• Prudent approach to land banking
• Beneficiary of recovery in residential prices

FY17 Core PATMI Grew 10%

UOL reported its FY17 results which beat our expectations. Revenue jumped 46% to S$2,103.2m. This was largely attributed to the consolidation of UIC Group and the associated and JV companies of both entities which contributed an incremental S$544.7m in revenue. Excluding this, topline still grew 14% and this was underpinned by the progressive revenue recognition largely from Principal Garden, which is 99.8% sold at an average ASP of S$1,648 psf (as at 31 Dec 2017).

PATMI surged 210% to S$891.0m due to the consolidation and resulting negative goodwill from the acquisition. The group’s core PATMI (excluding fair value and other gains and losses) rose 10% to S$355.9m and came in above our forecast of S$314.8m. A first and final dividend of 17.5 S cents per share was declared, higher than the 15 S cents DPS declared in FY16.

Upcoming Launches in 2Q18 and 2H18

UOL and UIC sold 798 and 292 units in FY17, respectively. These combined 1,090 units fetched total sales value in excess of S$1.5b. Looking ahead, UOL intends to launch its Amber 45 project in Apr this year, while its Potong Pasir Ave 1 site (Raintree Gardens en-bloc) is also expected to be launched in 2H18.

For Amber 45, we believe management will target ASPs of at least S$2k psf given its freehold status. Its project pipeline in Singapore will continue into next year, with the expected launch of 92-128 Meyer Road site (en-bloc purchase of Nanak Mansions), which is also on freehold land tenure.

Although management is optimistic on the Singapore residential market, it highlighted that it would adopt a selective and prudent approach towards replenishing its land bank. In terms of investment properties, there was some pressure on rentals, with negative double-digit rental reversions seen for office and slight negative reversions registered for its retail assets in Singapore.

Revised FV Estimate of S$10.63

We fine-tune our assumptions following a change in analyst coverage and derive a RNAV-based fair value estimate of S$10.63 (previously S$9.70). We continue to like UOL for its healthy balance sheet and strong exposure to the Singapore residential market, which is in the nascent stage of recovery.

Source: OCBC Research - 28 Feb 2018