Maintain BUY
Previous Rating: BUY
Current Price: S$4.51
Fair Value: S$5.48
2Q11 broadly in line. UOL announced 2Q11 PATMI of S$202.2m, up 16% YoY over restated 2Q10 figures. Stripping out revaluation gains of S$96.5m, 2Q11 PATMI fell to S$105.7m which constitutes 20% of our FY11 estimates and is broadly in line with our expectations. 2Q11 revenue also increased 40% YoY to S$455.9m, mainly due to the implementation of INT FRS 115 earlier this year (without which, growth would be a more muted 25%), increased revenue recognition from development projects under construction and the added contributions from Parkroyal Serviced Suites Kuala Lumpur which was acquired in 4Q10 and Parkroyal Melbourne Airport hotel in Apr 11.
Bedok Reservoir development to launch in November. Management indicated that it would launch its Bedok Reservoir site in Nov 11. Despite global uncertainties and possible softening of the private residential market, we think UOL would achieve decent margins given a estimated breakeven of S$825 psf and recent transactions at around S$1,000 psf in the vicinity. If economic headwinds worsen, however, the pace of sales may be somewhat slower but we believe the likelihood of this is already priced into the stock at this juncture. The Lion City hotel project has received provisional permission to be redeveloped into a 60:40 commercial-residential (SOHO) units. Of the other projects under UOL's book, there are ~30 units left at Spottiswoode while the remaining projects are mostly sold out.
Hotel results pulled back by acquisition costs. 2Q11 revenues from UOL's hotel operations (Pan Pacific Hotels Group "PPHG") increased 13% YoY to S$88.1m, largely due to the added contribution of Parkroyal Melbourne Airport. The acquisition resulted in higher administrative expenses (up 32% YoY to S$11.6m) and also an added transaction cost of S$8.1m for stamp duty, legals fees, etc. Interest expenses in 2Q11 also increased to S$3.2m versus S$0.7m in the same period last year as PPHG's debt load increased 78% YoY to S$313.1m. As a result, 2Q11 net profit of the hotel segment fall 55% YoY to S$6.6m.
Uncertainty breeds opportunities. We continue to see UOL as a beneficiary of the uncertainty in the residential property space given its limited residential land-bank and as most of its launched projects are sold out. Potential positive catalysts ahead include accretive land-banking acquisitions, positive sales at the Bedok Reservoir and Lion City Hotel developments and further consolidation of its UIC stake. We update our RNAV and maintain BUY at a fair value estimate of S$5.48 (at 20% discount to RNAV) versus S$5.57 previously.
No comments:
Post a Comment