Analysts at DBS Group Research and OCBC Investment Research (OIR) have kept “buy” on UOL Group U14 as the company seeks to execute on future acquisition and redevelopment plans.
For its FY2022, UOL results came within the analysts expectations, with 60% y-o-y growth in earnings at $492 million on top of rise in profit before tax and fair value gains. The improved performance was achieved on the back of a 28% rise in revenues, largely attributable to higher recognition within its property development division and rebound in hotel operations.
DBS’s Derek Tan and Rachel Tan note that UOL’s property division performance was boosted by higher progressive recognition from Clavon, The Watergardens at Canberra as well as AMO Residences, on top of higher number of handover units at Park Eleven in Shanghai. The analysts have kept their target price at $8.40.
For FY2022, UOL’s hotel operations were bolstered by an improvement in revenue per available room (RevPAR) across its various geographies which rose on the back of contributions from new and refurbished hotels. This includes Parkroyal Collection Marina Bay in May 2021, Pan Pacific London in September 2021 and Parkroyal Collection KL in June 2022.
As a result of a stronger operational performance from its hotel division, UOL’s gross profit margin improved to 33% in FY2022, the analysts add.
The growth trajectory for UOL’s hospitality division remains steady, with a further rise in RevPAR underpinned by the pent-up travel demand with the return of Chinese tourists to be the swing factor in 2023, DBS says. This is currently being constrained by the lack of flight capacities out of China.
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“The hospitality division will also be bolstered by the opening of 347-room Pan Pacific Orchard in 2023 with a planned pipeline of new managed and owned hotels across the region. In the pipeline is the opening of 18 more hotels with an additional 3,895 rooms to be added to the inventory over the coming years,” they say.
In FY2022, UOL sold 703 residential units, OIR analysts point out. Although this was lower than the 799 units sold in FY2021, the combined sales value of $1.55 billion slightly outpaced that of FY2021. They add that UOL had recently announced the successful tender for the en bloc purchase of the freehold Meyer Park Condominium, which is likely to be launched in 2024.
This year, UOL is planning to launch two projects — Pinetree Hill at Ulu Pandan in 1HFY2023 and Wetten Estate in Bukit Timah in 2HFY2023. Both projects are within 1 kilometres from popular schools, the analysts highlight.
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UOL’s net gearing ratio remained relatively low compared to its peers at 0.26x. However, it only hedged 45% of its debt, with average borrowing cost increasing from 1.26% in FY2021 to 2.25% in FY2022.
“While cap rates are expanding, it is happening at an uneven pace in different markets, with a gap still existing between buyers and sellers. After factoring in this set of full-year results in our model, our fair value estimate declines from $8.52 to $8.26,” OIR analysts add.
As at 3.14pm, shares in UOL are trading 1 cent lower or 1.5% down at $6.53.
