• 1Q19 core PATMI +26.6% YoY
• Ramp up in sales at The Tre Ver
• MCH assets offer opportunities

1Q19 Results Within Our Expectations

UOL reported its 1Q19 results which met our expectations. Group revenue rose 11.7% to S$741.2m, but PATMI fell 4.9% YoY to S$72.4m. If we strip out an accounting reversal of S$31.9m due to the amortisation of property development backdrop in relation to the consolidation of UIC Group (1Q18: S$6.3m), we estimate that core PATMI would have increased by 26.6% YoY to S$104.3m, or 28.4% of our FY19 forecast.

The Tre Ver Now 73% Sold; Strong Momentum Post CNY

As at 31 Mar 2019, UOL’s Amber45 and The Tre Ver projects were 69.8% and 34.6% sold, respectively. However, sales momentum has been strong post CNY, especially for the latter. Currently, sell-through rates have reached 75% for Amber45 and 73% for The Tre Ver.

We believe this can be attributed to The Tre Ver’s good specifications and competitive pricing (ASP of S$1,580 psf versus Park Colonial: S$1,750 psf and Woodleigh Residences: re-launched units starting from S$1,733 psf), which is made possible given UOL’s prudent land cost. Agent’s commissions have also been increased from >1% at project launch to sub-3%, but this is common practice in Singapore.

Full Control Over Marina Centre Holdings

UIC, a 50.1%-owned subsidiary of UOL, recently acquired a 24.3% stake in Marina Centre Holdings (MCH) for S$485.3m, such that UIC and UOL holds 77.3% and 22.7% of MCH, respectively, implying full control. MCH owns Marina Square Shopping Mall and the Marina Square hotels (Pan Pacific Singapore, Marina Mandarin Singapore and the Mandarin Oriental, Singapore). At the same time, MCH had also raised its stake in Aquamarina Hotel Pte Ltd (AHPL) from 50% to 75% for S$190m (UOL owns the remaining 25% stake).

AHPL in turn owns the Marina Mandarin Singapore. This development provides UOL with the increased flexibility to value add to this portfolio of assets, including taking advantage of the Strategic Development Incentive from the 2019 Draft Master Plan.

While a better alignment of interests and potential intensification of plot ratio are positives, management highlighted that development charges/premiums are at high levels, and a detailed feasibility study needs to be carried out first. After adjustments, our RNAV-derived fair value increases from S$8.45 to S$8.50. Maintain BUY.

Source: OCBC Research - 13 May 2019