UOL residential strategies revealed

From landbank replenishment to capital deployment.

UOL should adopt a cautious stance, replenishing land at the rate of sales or below, and will likely be pouring most of its efforts capital on growing recurring income in investment and hospitality assets, according to the latest OCBC market pulse report.

Here's more from OCBC:

Results mostly in line after excluding fair value gains UOL reported 2Q13 PATMI of S$431.4m which increased 151% YoY mostly due to fair value gains at Novena Square, United Square and Odeon Towers where valuation cap rates have compressed some 25 to 50 bps. Excluding fair value and other one-time gains, 1H13 attributable profit is an estimated S$164.4m which is broadly in line with our expectations – constituting 45% of OIR’s FY13 forecast of S$368.3m – but somewhat below the street’s view (41% of FY13 consensus of S$391.8m). UOL’s 1H13 topline cumulates to S$552.1m which is again broadly on target and forms 47% of our forecast of S$1,168.7m for FY13.

More likely to replenish land-bank cautiously. For its residential strategy ahead, we see management remaining cautious and more likely to replenish land at the rate of sales or below. The group recently won a new GLS site at Sengkang West Way at S$262.1m which is expected to yield 550 homes. Future launches in 2H13 are Bright Hill (445 units) and St Patrick’s Garden (186 units) projects in 2H13. Management reports that it has launched three blocks (480 units) at the2Esplanade in Tianjin China with about 80% of units sold. Its Jalan Conley project in Kuala Lumpur, Malaysia is on target to be launched in 4Q this year.

Pan Pacific Hotel Group exit offer now unconditional. The direction of capital deployment ahead is likely to be focused on growing recurring income in investment and hospitality assets. To recap, UOL had made a cash offer of S$2.55 per share to delist PPHG and we understand that the exit offer is now unconditional with a closing date of 13 Aug 2013. Again, from our previous discussions with management, we continue to believe that material operating changes, i.e., a major re-structuring or REIT listing, are unlikely for these newly fully consolidated hotel assets.