Higher fair value gains on property investment lift UOL's Q2 earnings

Fri, Aug 09, 2019

HIGHER fair value gains on its investment properties outweighed lower revenue recognition from development and higher finance expenses to lift results for UOL Group (UOL) in its second quarter.

Net profit for the developer and hotel operator for the three months ended June 30 shot up 48.1 per cent to S$195.4 million from the previous year's S$131.9 million.

Fair value gains on investment properties nearly trebled to S$181.9 million, from S$64.4 million.

Before fair value and other gains, group pre-tax profit was 7 per cent lower at S$141.8 million, as revenue fell 19.7 per cent to S$512.3 million from the preceding year.

The lower revenue was due to the absence of contribution from Principal Garden, which obtained its temporary occupation permit (TOP) last December.

The group also saw lower progressive revenue recognition from The Clement Canopy and Botanique at Bartley, which were completed in March and April 2019, respectively.

Revenue from property investments rose 3 per cent up to S$137.8 million, due to contributions by UIC Building and 72 Christie Street in Sydney, acquired in December.

Revenue from hotel ownership and operations fell 3 per cent to S$151.3 million, mainly from lower occupancies and room rates at Marina Mandarin and Parkroyal Darling Harbour, as well as ongoing refurbishments at Parkroyal on Kitchener Road.

Finance expenses rose 28 per cent to S$29 million as the group borrowed more for its purchase of Marina Mandarin Singapore and parts of the Marina Square complex.

Earnings per share increased to 23.18 Singapore cents from 15.67 cents in the year-ago period. The group does not declare interim dividends.

For the first half of the fiscal year, net profit rose 29 per cent, driven by higher attributable fair value gains of S$103.7 million.

UOL said that prices for new private homes in Singapore are expected to remain relatively stable. It plans to launch Avenue South Residence by the end of this month.

Group chief executive Liam Wee Sin said: "We see resilience in the market and potentially further upside for selected projects with strong location and product attributes."

As for office rents, they should be helped by steady demand and tightening vacancy, while retail rents will remain under pressure amidst "tepid economic growth".

The group addded: "In the United Kingdom, economic and political uncertainties from Brexit continue to weigh on the London residential property market. Leasing activities remain resilient in Midtown where the group owns two commercial properties.

UOL shares finished S$0.04 or 0.6 per cent up at S$7.20 on Thursday before the results were announced.