UOL profits crashed 51% to $433.72m in FY2018

It was hit by lower development profits, which was offset by higher UOB dividend income.

UOL Group’s profits fell 51% YoY from $880.24m in 2017 to $433.72m in 2018, it revealed in its financial statement.

UOL revenue grew 13% to $2.4b from $2.1b thanks to the consolidation of revenue from the investment properties of UIC and 120 Holborn Island, UIC’s hotels, and UIC’s technologies arm. Higher dividends from UOB, which rose to 115 cents per share in 2018, boosted dividend income.

The property development segment recorded lower revenue mainly from the completion of Alex Residences in September 2017 and Principal Garden in December 2018, and Botanique at Bartley as the project approaches completion in the second quarter of 2019.

This was partly offset by revenue from Amber45 which was launched in May 2018 and higher revenue from The Clement Canopy project and Park Eleven, Shanghai where revenue was recognised on 47 of 150 units that were handed over.

DBS Equity Research analyst Rachel Tan noted that UOL is expected to launch its remaining land bank (Meyerhouse and Avenue South Residence) of more than 1,000 units in 2Q2019. “Amber 45 (launched in May 2018) and The Tre Ver (launched in July 2018) continue to achieve steady sales with 71% and 40% sold to date respectively. UOL maintains its plans to launch both Meyerhouse (Nanak Mansions; 56 units) and Avenue South Residence (Jiak Kim, 1,074 units) in 2Q19,” she said.

“With an unsold inventory of some 480 units and unlaunched pipeline of 1,130 units, management believes they can remain selective on landbanking in the short-term but will continue to scout for new opportunities to replenish its landbank at an appropriate time,” Tan added.

In China, the handover of Park Eleven Phase 1 began in December 2018. There are around 109 units that were sold that are expected to be handed-over and recognised in FY2019. UOL also targets to launch Park Eleven Phase 2 with 127 units, and Phase 3 with 107 units in 2019.

In the UK, UOL targets to launch One Bishopsgate Plaza (160 units) in 3Q2019 despite Brexit.

Meanwhile, the RevPARs at the Singapore and Australian hotels increased by 6% and 0.6% YoY respectively. “China and Yangon markets remain challenging. Pan Pacific Melbourne has taken quite a while to ramp-up, and its operational data is showing positive signs – the hotel achieved 93% occupancy in February 2019 and average daily rate (ADR) is creeping up close to the previous rates charged,” Tan added.

Approximately 20% to 26% of the group’s office leases (both UOL and UIC) are expiring in 2019 and the bulk is in Odeon Towers (42%) and Stamford Court (64%). Management sees healthy enquiries to back-fill the space at Odeon Towers.

“On a positive note, management now sees signs of stabilisation of retail rents,” Tan said, noting that UOL’s retail malls are seeing positive rental reversions. “In Singapore, OneKM, now renamed to KINEX, is undergoing a tenant repositioning exercise towards an ‘experiential mall’ concept. Management believes the “worst is over’ for KINEX. KINEX’s pre-committed leases have reached more than 90%.”

The share of profit of associated and joint venture companies for 2018 was lower as the results of UIC Group and the common associated and joint venture companies of UIC and UOL Group are no longer equity-accounted but are consolidated with those of the group from 1 September 2017.

The board proposed a final dividend of 17.5 cents per share, subject to shareholders’ approval.