InvestIdeas

Not vested. From UOL:-

S$1.1b of unrecognized revenue from existing projects. Development projects launched in the last two years should provide good earnings visibility for UOL until FY10. Majority of these units were fully taken up and we estimate total revenue of S$1.3b from UOL's existing development projects.

Of this, S$1.1b have yet to be recognized and the bulk will only be recognized in FY08 and FY09.
Future launches in mass-mid market segments. Having launched the Nassim Park Residences, its remaining land banks fall in the mid and mass property market segments, which are less prone to price corrections going forward. With a substantial pipeline of projects currently under development, we see no rush for UOL to launch new projects in the near future, especially with soaring construction costs.

With UOL's strong balance sheet and cashflow from the current projects coming in over the next few years, any delay in launches is unlikely to have a significant impact on its liquidity and debt servicing position.

Potential value to be unlocked. UOL's holdings in UOB and UIC shares offer the potential for the unlocking of value for shareholders. UOL's stakes in UOB and UIC are currently valued at S$1,187.9m or S$1.49 per UOL share (as at 4th July 2008) and make up 45.1% of UOL's current market cap. However, we believe that any move to unlock this value will only occur over the mid to long term as we see little liquidity needs for UOL, with its low gearing and cashflow from development properties in the next 2 years.

In addition, with further weakness in the property market expected, developers such as UOL are likely to stay conservative with acquisitions and thus we do not foresee capital requirement for acquisitions over the near term.

Resume coverage with BUY. We resume coverage with a BUY rating and fair value of S$4.94. This is based on the market values of UOL's holdings in listed entities (UOB, UIC and Hotel Plaza) and the RNAV of its development projects and investment properties, which we ascribe a discount of 30% to take into account the weakening property market.

We like UOL for its low gearing, diversified revenue stream, high margin of safety for its RNAV, low land bank exposure to the high end luxury segment and the potential to unlock value. Key risks to our valuation include weakness in the property market and de-rating of UOB, UIC and Hotel Plaza.

Our 4th university will be built at the Expo Changi. UOL triggered a reserve site sale last year and won the tender. The site is beside the Tropical Spring condo. Wonder if UOL will be launching sale of the condos soon and at what price levels.

i think, we can check REDAS website on prices, etc.

the 4th university, to be ready in 3 years time (presumably 2011), has 500 seats for under-graduate study applicants.

weekly chart is as below:



- Chart reviewed on 11-Aug'08.

UOL sees 49% drop in Q2 earnings
By UMA SHANKARI

PROPERTY group UOL's second-quarter net profit fell 49 per cent to $145.0 million, from $286.3 million a year ago, as the group saw lower fair value gains on its investment properties.

Turnover for the three months ended june 30, 2008 rose 4 per cent to $209.3 million, up from $201.6 million in Q2 2007. The increase in revenue came largely from hotel operations, with improved performance of the UOL's hotels in Singapore, Australia and Vietnam.

Revenue from property investments also improved due to higher average rental and occupancy rates in UOL's investment properties, it said.

Separately, UOL's listed subsidiary Hotel Plaza also reported its second quarter results yesterday. Hotel Plaza's net profit for the three months ended June 30, 2008 increased marginally by 5 per cent to $16.2 million, from $15.5 million in the corresponding quarter of 2007.

Hotel Plaza's revenue in second quarter of 2008 increased 16 per cent to $79.9 million, from $69.2 million a year ago, as the company's hotels fared better.

UOL gained five cents to close at $3.26 yesterday. The stock has shed some 27.9 per cent since the start of the year.

Subsidiary hotel Plaza, on the other hand, lost three cents to close at a 52-week low of $1.49 yesterday. Hotel Plaza has lost 14.9 per cent in 2008.

One of the more defensive/diversified property company with backing by old Wee.
I always wonder if old Wee can consolidate his property companies- UOL+ UIC + Haw Par, maybe the size of it can rival City Dev or Keppel Land.

IMHO, UOL is hardly diversified across geographical segments.

Rev by geographical segment, Singapore = 68.1%
Op Profit by geographical segment, Singapore = 96.1%
Assets by geographical segment, Singapore = 87.1%

It's a PURE Singapore play compared to CDL and KepLand.
It's a OK investment if one is juz looking at the local market.

Hi LenaHuat,

Agreed that they are not geographically diversified, but diversified across property sectors (hotels, residential, offices and retail)
Capitaland will be the most diversified, in terms of geography and sectors.

Mon, 8 Sep 2008, 09:13:23 SGT

Share prices of property developers had been battered over the past month, which we think was due to the recent spate of negative newsflow on the property sector. Taking into consideration of a weaker economic outlook on an oversupplied Singapore office market ahead, we are lowering our office rental growth rate assumption between 2009 and 2011, from the previous -15% to -35% and raising our office cap rate from 4.5% to 5%. Based on our ‘doomsday’ assumptions, our worst-case-scenario valuation stands at S$2.76. At current share price, we think the market is being overly-pessimistic on UOL. In light of the economic headwinds, sentiments on property developers could stay weak in the near future. We are lowering our RNAV estimate from S$5.51 to S$4.55. Maintaining a RNAV discount of 30% and pegging the value of its listed equities base on market value, our fair value of UOL has been lowered to S$3.83 (prev S$4.49). Maintain BUY.

Sentiments battered on negative newsflow. Share prices of property-related counters had been battered over the past month, with the FTSE ST Real Estate index fell 14.2% since August. We think this was due to the recent spate of negative newsflow on the property sector. Asset value write-down by AustraLand and the Chinese government’s cautious stance on bank lending to property developers had affected sentiments on developers with overseas exposure. Local developers and hospitality plays were not spared as well, affected by negative news like the lowering of Singapore’s 2008 GDP growth forecast to 4-5% and concerns on the slowing tourist arrival figures and ability to meet the tourist arrival target of 10.8m for 2008.

Office rental rates revised downwards. We are lowering our office rental growth rate assumption between 2009 and 2011, from the previous -15% to -35% and raising our office cap rate from 4.5% to 5% to take into consideration of the impact of a weaker economic outlook on an oversupplied Singapore office market ahead. As such, we are lowering our RNAV estimate for UOL’s investment properties from S$2,102.9m to S$1,622.4m.

Doomsday assumption factored in? Since our last report on 13th Aug, UOL’s share price had fallen by 17.5%, in line with the general weakness on the sector. Base on our ‘doomsday’ assumptions of trough valuation of UOL’s listed investments, a 20% drop in Singapore mass-mid market property prices, and a 50% discount to RNAV, we derive our worst-case-scenario valuation of S$2.76. At current share price, we think the market is being overly-pessimistic on UOL.

Near-term sentiment to stay weak. In light of the economic headwinds ahead, we think sentiments on property developers could stay weak in the near future. Any possible change in the mood will have to depend on the private home sales figure for the month of September, which will paint a better picture on the direction of the pricing and volume of home sales in Singapore after the ‘Chinese Hungry Ghost Month’ in August.

Fair value lowered to S$3.83. We are lowering our RNAV estimate from S$5.51 to S$4.55, after lowering our office rental growth rate assumption and raising our cap rate assumption. Maintaining a RNAV discount of 30% and pegging the value of its listed equities based on market value, our fair value of UOL has been lowered to S$3.83 (prev S$4.49). Maintain BUY.

LenaHuat on 11 Aug 2008 wrote:Our 4th university will be built at the Expo Changi. UOL triggered a reserve site sale last year and won the tender. The site is beside the Tropical Spring condo. Wonder if UOL will be launching sale of the condos soon and at what price levels.

UOL was ahead of the TID (Hong Leong + Mitsui Fudosan) consortium to buy up land near to the 4th University

- Progressive revenue recognition of sold projects
- Contributions from sale of Nassim Park Residences in associates' results