• UOL GROUP LIMITED (SGX:U14)'s 1Q19 EPS of 8.59 Scts was broadly in line at 20% of our FY19 forecast.
• Residential sales saw a good pick-up at The Tre Ver post 1Q.
• Maintain ADD call with an unchanged Target Price of S$8.45.

UOL's 1Q19 Results Highlights

• UOL GROUP LIMITED (SGX:U14) reported 1Q19 net profit of S$72.4m, which was 5% lower y-o-y, due to accounting reversal or property development backlog arising from the Purchase Price Allocation exercise on the consolidation of UNITED INDUSTRIAL CORP LTD (SGX:U06) in 2017. Excluding this, net profit would have improved a healthy 27% y-o-y.
• The 12% y-o-y jump in 1Q19 revenue was due to the recognition of residential contribution from Park Eleven in Shanghai during the quarter.

Residential Projects Continue to Sell Well

• In Singapore, ongoing projects such as Amber 45 and The Tre Ver continue to enjoy healthy take-up. Amber 45 is now 75% sold while The Tre Ver is currently 73% taken up vs. a 35% sell-through rate at end-Mar 19. ASP for the latter has also inched up slightly to S$1,580psf.
• Buying interest has picked up as most new projects in the area have already been launched and UOL Group looks to continue de-risking this project. The group plans to roll out the 56-unit MEYERHOUSE in Jun 19, followed by the 1074-unit Avenue South Residence towards end-Jun/early-Jul.
• While market sentiment has improved, UOL Group is likely to continue to be selective in its landbanking strategy in Singapore.

Rental Income and Hotel Contributions Were Fairly Stable

• Rental income rose 4% y-o-y, thanks to contributions from the newly acquired office property in Australia. In Singapore, its office and retail portfolio saw a flat to slight negative rental reversion amid high occupancy.
• Within its hospitality business, Revpar in Singapore, China and Myanmar slipped, partly offset by a better performance in Australia, Vietnam and Malaysia.

Potential to Enhance Value of Marina Square Mixed Development

• The recent purchase by United Industrial Corp of the remaining stake in Marina Centre Holdings that it does not own, will enable the group to evaluate development/asset enhancement options for the Marina Square mixed retail/hotel site in the medium term. This would allow the group to potentially enhance the value of this land parcel in the longer run.

Maintain An ADD Rating

• We leave our FY19-21 EPS estimates unchanged and maintain our Target Price of S$8.45, pegged at a 30% discount to RNAV. Gearing ratio stands at 0.26x as at end-1Q19.
• Maintain our ADD rating.
• Upside catalyst could come from more definitive plans for the Marina Square mixed development site.
• Downside risks include slower-than-expected pace of residential launches and office market recovery.

Source: CGS-CIMB Research - 10 May 2019