SINGAPORE (May 15): OCBC is keeping its “buy” recommendation on UOL Group with a far value estimate of $10.63.
This came following the group announcing that its 1Q18 earnings fell 8% to $73.8 million from $80.3 million in 1Q17, mainly due to the $7.6 million amortisation and depreciation of fair value uplifts in 1Q18 under a purchase price allocation exercise when UIC was accounted as a UOL subsidiary from Sept 1, 2017.
Meanwhile, Pan Pacific Orchard took a $6.6 million accelerated depreciation charge following the decision to cease operations in the second quarter of 2018 for redevelopment.
Revenue for the quarter increased by 89% to $661.0 million, compared to $350.7 million last year.
See: UOL posts 8% decline in 1Q earnings to $73.8 mil
The group’s results missed OCBC’s and the street’s expectations due primarily to non-cash items.
Meanwhile, the weekend of May 12 and 13 saw the launch of Amber45, the group’s 139-unit freehold residential development situated in District 15 along Amber Road.
In a Monday report, analyst Andy Wong Teck Ching says, “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 May 11 that it was targeting an ASP of about $2,200 psf.”
The developer also intends to ride on the successful launch of Amber45 and launch The Tre Ver, a 729-unit condominium in Potong Pasir, in the near term.
In addition, the group is awaiting the official tender results for the Silat Avenue land parcel tender by the Urban Redevelopment Authority (URA), whereby it was the sole joint bidder together with 49.9%-owned UIC and Kheng Leong Company for $1.04 billion or about $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 $1,700 psf, in our view,” says Wong.
And assuming that the group will win this tender, it will have a robust pipeline of about 2,050 units ready to be launched in Singapore over the next 12 to 18 months.
As at 12.05pm, shares in UOL are trading at $8.61, giving it a FY18 price-to-earnings ratio of 20.1 times with a dividend yield of 2.0%.
