UOL Q3 net profit slips 7% to S$80m on lower earnings from development

Wed, Nov 13, 2019


UOL Group, which posted lower third-quarter net earnings, said the "Singapore residential market has shown signs of improvement with strong underlying demand".

The group's net profit slipped 7 per cent to S$80 million for the third quarter ended Sept 30 from S$85.7 million in Q3 FY2018, due mainly to lower profit from property development, it said on Tuesday.

Group revenue fell 10 per cent to S$476.6 million with lower progressive recognition of revenue from three development projects - Principal Garden, The Clement Canopy and Botanique at Bartley, which obtained their Temporary Occupation Permits in December 2018, March and April 2019 respectively.

The revenue decline was partly offset by higher progressive recognition of revenue from Amber45 and The Tre Ver, as well as higher sales from the group's management services and technologies segment.

Revenue from property development fell 34 per cent to S$109.3 million.

Revenue from property investments inched up 1 per cent to S$137.4 million, while that for hotel ownership and operations eased 3 per cent to S$166.3 million due mainly to lower occupancies and room rates at Marina Mandarin in Singapore and Parkroyal Darling Harbour in Sydney, as well as ongoing refurbishment works at Parkroyal on Kitchener Road in Singapore.

Revenue from management services and technologies climbed 22 per cent to S$41.2 million while dividend income grew by 10 per cent to S$22.4 million on the back of higher dividends received from United Overseas Bank.

Marketing and distribution expenses rose 11 per cent to S$24 million due mainly to launch expenses for Avenue South Residence, and ongoing sales of Amber45, The Tre Ver, Mon Jervois and V on Shenton.

Other operating expenses fell 11 per cent to S$32.1 million due to the absence of amortisation of development property backlog on units sold in The Clement Canopy.

Finance expenses rose 14 per cent to S$29 million on higher interest expenses on borrowings for the Avenue South Residence development and for the acquisition of shares in Marina Centre Holdings and Aquamarina Hotel.

For the nine months ended Sept 30, net profit rose 19 per cent to S$347.8 million. During the same period, revenue fell 5 per cent to S$1.73 billion.

Giving an update on its Singapore residential projects, UOL said Avenue South Residence was the top-selling project in Singapore for September, and options have been granted for more than 400 units since the project's launch in August 2019. Avenue South Residence has 1,074 units.

Amber45 and The Tre Ver have options granted for 80 per cent and 86 per cent of total units respectively.

UOL said limited supply and tightening vacancy should support office rents in Singapore, although cautious sentiment from the weakening economic outlook could limit rental growth. Retail rents remain under pressure amid weak retail sales and tepid economic growth.

Ongoing uncertainties over Brexit will continue to weigh on London's residential property market. However, leasing activities remain resilient in Midtown where the group owns two properties.

UOL said the China-US trade war could moderate growth in international tourist arrivals to the region. Trading conditions for the group's hotels in Myanmar and China remain difficult.

Earnings per share slipped to 9.50 Singapore cents in Q3 FY2019 from 10.18 cents in Q3 FY2018. Net asset value per share rose to S$11.69 as at Sept 30, from S$11.42 as at Dec 31, 2018.

UOL shares closed three Singapore cents higher at S$7.91 on Tuesday before the results announcement.

Citi analysts Brandon Lee and Goh Si Xian said: "UOL's Q3 FY2019 results provided few surprises, but lack of tangible progress on ongoing discussions with authorities on redevelopment of its older buildings (including Marina Square and United Industrial Corporation's offices) suggests to us any potential gross floor area (and net asset value) uplift may take time, with asset enhancement initiatives likelier in the near-term".

UOL owns 50.14 per cent of UIC.