• 1Q18 PATMI down 8.1% YoY
• S$2.2k ASP expected for Amber45
• Potential SG pipeline of 2,050 units

1Q18 Results Below Expectations on Noncash Items

UOL reported its 1Q18 results which missed ours and the street’s expectations due primarily to non-cash items. Revenue surged 88.5% YoY to S$661.0m and was largely attributed to the consolidation of UIC Group and associated and JV companies of both entities from 1 Sep 2017.

Excluding this, revenue was down 2% as there was a decline of 7% and 4% from its property development and property investments segments, respectively, but partially offset by its hotel operations (+9%).

PATMI slipped 8.1% YoY to S$73.8m and formed 17.8% and 17.4% of ours and Bloomberg consensus’ FY18 forecasts, respectively.

Bottom-line was impacted by a S$7.6m amortisation and depreciation of fair value uplifts from the purchase price allocation exercise in relation to the consolidation of UIC Group, coupled with an accelerated depreciation charge of S$6.6m on Pan Pacific Orchard (PPO) which will be undergoing redevelopment.

Looking ahead, we expect some of these non-cash related expenses to be recurring in nature, but the accelerated depreciation of PPO should cease given that the hotel has been scheduled for redevelopment in 2Q18.

Launch of Amber45

The weekend of 12-13 May saw the launch of Amber45, UOL’s 139-unit freehold residential development situated in District 15 along Amber Road. Given that the preview two weeks ago drew over 3,000 visitors amid improving buyer sentiment, it was not surprising that UOL highlighted during the analyst conference call on 11 May that it was targeting an ASP of ~S$2,200 psf.

Pipeline of Singapore Projects Remain Strong

UOL is also awaiting the official tender results for the Silat Avenue land parcel tender (99-year leasehold) by URA, whereby it was the sole joint bidder together with UIC (49.9%-owned) and Kheng Leong Company (Private) Limited for S$1.04b (~S$1,138 psf ppr).

Given the complexities involved in the construction process (PPVC requirements for a 56-storey high development), breakeven price is likely to come in above S$1,700 psf, in our view.

Assuming UOL is awarded this site, it will have a robust pipeline of ~2,050 units ready to be launched in Singapore over the next 12-18 months. We maintain our fair value estimate of S$10.63.
 

Source: OCBC Research - 14 May 2018