UOL attractively valued following UIC consolidation

By Samantha Chiew / The Edge Singapore | March 6, 2018 11:56 AM SGT
SINGAPORE (Mar 6): DBS is maintaining its “buy” call on UOL Group with a higher target price of $10.23, as the group is currently trading at an attractive valuation of about 0.8 times net asset value (NAV) following the consolidation of United Industrial Corporation (UIC).
After accounting for UIC as the group’s subsidiary, UOL's FY17 earnings trebled to $891.0 million compared to $287.0 million in FY16.
Group revenue for the full year ended Dec 2017 was also 46% higher at $2.10 billion, also due mainly to the UIC consolidation and the associated and joint venture companies of UOL Group and UIC Group from Sept 2017, adding $544.7 million to the group’s topline.
Pan Pacific Melbourne, a 396-room hotel located along the Yarra River. Formerly Hilton Melbourne South Wharf, the development was rebranded Pan Pacific Melbourne after it was acquired by property group UOL in March 2017 for A$230 million ($246 million) (Credit: Pan Pacific Hotels Group)
On the back of the group’s strong FY17 results, UOL has declared a higher dividend of 17.5 cents compared to 15 cents last year and is expected to maintain this rate going forward.
In a Tuesday report, analyst Rachel Tan says that she is more positive compared to consensus as the group is well positioned to benefit from improved sentiment in Singapore’s property and hospitality segments.
This is due to the fact that the group is the earliest to land bank at a lower price and has three land sites amounting to about 925 units launching in the coming quarters.
The upcoming launch will be the 139-unit Amber 45 in 2Q18 at a target selling price of at least $2000 psf, which will then set a new benchmark price in the area.
In addition, the turnaround in the hospitality segment bodes well for UOL’s hotel properties, and now with UIC’s hotel properties.
Looking ahead, the group intends to rejuvenate its portfolio by redeveloping Pan Pacific Orchard into a new “green” hotel, which is scheduled to complete in 2021.
Moreover, the analyst believes that the group’s acquisition of Pan Pacific Melbourne in 2017 will drive growth, while performances from hotels and serviced residences are expected to turn up on the back of stronger economic growth driving business travel.
“We expect the operational performance of the group’s hotels and residences in Singapore and Australia to turn up,” says Tan.
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