UOL

UOL: 2Q15 results met expectations despite net profit ceding 27.9% y/y to $152.5m, largely due to a 56% drop in fair value gains. Excluding these one-off items, 1H15 core earnings of $172.2m formed 41% of full year consensus estimate.

For the quarter, revenue spiked 60% to $342.2m, driven by robust residential sales of $162.3m (+343%), from Katong Regency, Seventy St Patricks, Riverbank @ Fernvale and Botanique at Bartley, as well as higher rental income of $54.9m (+15.3%) contributed by OneKM mall.

On the other hand, revenue from hotel operations of $98.6m (-5.6%) was dragged by weak performances of Pan Pacific Perth, PARKROYAL KL and Yangon.

The higher project costs margin from property development segment took its toll on gross margin, knocking it down by 15.3ppt to 40.3%.

Bottom-line was further dampened by higher marketing expenses (+77% to $18.2m) and weaker profits from JVs (-47% to $5.5m) as contribution from Archipelago development project eased.

On outlook, the group is still generally positive about its niche property development strategy notwithstanding the sluggish housing market. However, management cautioned that office and retail rentals may be pressured by new supply and anticipate more headwinds for domestic hotel operations amid slow visitor arrivals and oversupply.

As such, the group is likely to remain selective in replenishing its land-bank in Singapore and continue to be cautious in deploying its capital.

UOL is currently trading at 0.66x P/B or 33.5% discount to its NAV of $9.87.

Latest broker ratings:
CIMB maintains Add, cuts TP to $8.24 from $8.40
OCBC upgrades to Buy, cuts TP to $7.43 from $7.97