Strong execution
- 1H22 core EPS of 21.44 Scts was in line, at 54% of our FY22F forecast.
- Higher residential and hotel revenue offset weaker rental income.
- Reiterate an Add rating with a TP of S$8.00.
1H22 results highlights
UOL reported a 36% yoy rise in 1H22 revenue to S$1.53bn on higher property development and hotel revenue while PATMI surged 306% yoy to S$371m, due to fair value gains on investment properties. Stripping out the one-offs, 1H net profit would have increased 67% yoy to S$181m. UOL’s balance sheet remains healthy, with a low net debt to equity ratio of 0.28x.
Brisk take-up at its Singapore residential projects
Property development revenue grew 45% yoy to S$1bn in 1H22 on higher progressive recognition of revenue from Clavon (100% sold), Avenue South Residence (98% sold), The Watergardens at Canberra (90% sold) as well as The Sky Residences in London (37% taken up). In Jul, UOL launched the 372-unit AMO Residence in Ang Mo Kio Ave 1 and achieved a 98% take-up rate on the first day of launch. UOL won a government land sale residential land parcel at Pine Grove (Parcel A) in Jun 22 for S$671.5m. Together with the Watten Estate Condominium enbloc land parcel, UOL has a potential development pipeline of 720 units. These new projects, in addition to progressive billings from its existing projects, are likely to underpin the group’s residential earnings visibility.
Weaker rental income on lower office occupancy
Rental revenue declined 1% yoy in 1H22 to S$248m, on lower occupancy in Singapore due to asset enhancement works at Singland Tower and Clifford Centre, which is slated for redevelopment from FY23. UK properties also reported lower occupancy due to a lease forfeiture and exercise of lease break. Retail occupancy increased slightly to 95.7%, amid a 4.5% positive rental reversion. The asset enhancement works at the group’s properties are likely to be value-accretive, when completed in the medium term, in our view.
Hotel operations rebounded on travel recovery
Hotel revenue surged 64% yoy to S$206.3m, thanks to a 126% increase in RevPAR for Singapore hotels while Oceania hotels saw a 22% rise, on a rebound in global travel. UOL also benefited from the reopening of PARKROYAL COLLECTION Marina Bay and commencement of the Pan Pacific London in Sep 21. UOL expects its hotel performance to improve going into 2H22F, in anticipation of more borders reopening. Meanwhile, Faber House has received the government’s in-principle approval to redevelop the property into a 250-key hotel. Construction works are planned to commence in 1H23F and targeted for completion in 1H26.
Reiterate an Add rating
We keep our FY22-24F EPS estimates unchanged post results and maintain our RNAV at S$13.34. TP remains at S$8.00, based on an unchanged 40% discount to RNAV. We continue to like UOL for its diversified business model with a high proportion of recurring income. Re-rating catalysts could come from a faster-than-projected recovery of its hotel operations. Downside risk: slower-than-expected pace of residential sales.
