• FY18 core PATMI -0.9% YoY
• Unchanged DPS of 17.5 S cents
• Higher FV of S$8.45

FY18 Results Within Our Expectations

UOL reported its FY18 results which met our expectations. Group revenue rose 13.4% to S$2,397.3m due to higher contribution from property investments and hotel operations, but partially offset by lower revenue from property development. PATMI fell 50.7% to S$433.7m but this can be attributed to the negative goodwill arising from the consolidation of UIC in 3Q17.

Excluding this and other impairment charges and fair value gains, UOL’s core PATMI inched down slightly by 0.9% to S$348.4m. This formed 98.1% of our full-year forecast. A first and final dividend of 17.5 S cents per share was declared, unchanged from FY17 and translates into a dividend yield of 2.6% (based on closing price of S$6.77).

Two Launches Aimed in Singapore in FY19

For UOL’s ongoing Singapore residential projects, it has sold ~71% of Amber45 (average ASP of S$2,344 psf) and ~40% of The Tre Ver (average ASP of S$1,558 psf). Management considers progress for the latter to be “on track”, while Amber45 has outperformed its expectations in light of the property cooling measures in place.

Looking ahead, UOL will launch two projects in 2Q19, namely MEYERHOUSE and Avenue South Residence. MEYERHOUSE is a freehold project at 92-128 Meyer Road, and management will position it as a highly differentiated high-end product with large format units.

Avenue South Residence will have an estimated 1,074 residential units and is aimed at capitalising on the Greater Southern Waterfront growth story. While land tenders have become more subdued, UOL will adopt a selective approach towards replenishing its landbank.

Investment Properties Largely Trading Well

For its investment properties, its retail portfolio in Singapore registered a 2.4% increase in shopper traffic in FY18. Although rental reversions were mixed, it was slightly positive on an overall portfolio basis. Its Singapore office portfolio also saw positive rental reversions, but this was boosted by some short-term lease extensions signed at above-market rents. Excluding this, rental reversions were slightly negative in FY18.

Overall cap rates compressed by 10-15 bps, and stood at 4.85% for the retail properties and 3.85% for the office properties. After fine-tuning our assumptions, our RNAVderived fair value estimate increases slightly from S$8.41 to S$8.45.

Source: OCBC Research - 27 Feb 2019