Here's how UOL's aggressive buying spree is expected to bear fruit

Total assets in 2016 may grow by 3.3% to $12bn.

The past 12 months was particularly fruitful for UOL in terms of capital deployment, with an attributable S$710m of asset acquisitions, in Singapore (45%) and UK (55%). This includes recent joint purchases of Holborn Island and Raintree Garden enbloc site, with UIC, for S$760m total or an attributable 50% share of S$380m.

CIMB believes that these acquisitions could increase its 2Q16 total asset base by 3.3% to S$12bn and earnings-accretive.

UOL and UIC purchased Holborn Island, a mixed office/retail property in London, for £229.6m. The 348,088 sq ft building is located within walking distance of Chancery Lane and Farringdon tube stations.

According to media reports, this property has an initial net yield of 5.75% and should bolster the group’s recurrent income base with its a long lease expiry profile. This is UOL’s third property in UK and increases the group’s exposure to the country to 9%.

Locally, UOL is building Singapore landbank via enbloc parcel. UOL and UIC successfully tendered for the Raintree Gardens enbloc site in Pasir Panjang on a 50/50 basis.

"We think this a positive as it extends UOL's residential income visibility," said CIMB.

As the acquisition is subject to approval by Strata Titles Board and topping up the land tenure to 99 years from the present remaining 70 years, CIMB expects the development to be launch-ready only in the next 1-2 years.

CIMB added that the tender price for Raintree Gardens of $334.2m, together with an estimated additional payment to top up the land tenure to 99 years could result in a total land cost of S$759psf ppr, based on the allowable GFA of 563,940sq ft.

"We estimate breakeven cost to be cS$1,200psf and using ASP of S$1,350psf, this project can generate a PBT return of 10%. We estimate this project can add 1 Sct to our RNAV estimate when completed and fully sold," said CIMB.

CIMB also sees new residential launch to extend the firm's residential earnings visibility.

In the meantime, UOL is looking to market its 505-unit Clementi Ave 1 project in 1Q17. CIMB reckons breakeven cost could approximate $1,200psf vs. ASP of S$1,300-1,400psf.

"These contributions would bolster locked-in profits from ongoing projects where sales improved at a steady clip, with Botanique at Bartley at 97% sold, Riverbank @ Fernvale
at 92% and Principal Garden at 45%," it explained.