Early bird: UOL's early land buys give it more pricing room

This will help it avoid lower profits from higher ABSD rates and tighter LTV limits.

Amidst the projected profit cuts and weaker demands brought about by higher Additional Buyer Stamp Duty (ABSD) rates and higher loan-to-value (LTV) limits on private homes, UOL could be less impacted as it was the earliest to grow its landbank (most acquisitions were in 2016, except Silat Avenue) at a lower price, DBS Equity Research said. This gives UOL more room in pricing its properties.

DBS Equity Research analyst Rachel Tan notes that its presales for residential projects are “doing well amidst muted residential outlook.” As of 2017, UOL has substantially sold most of its projects, 1,090 properties for $1.05b, that are completed or currently under development and has added three sites which could yield close to 925 units when launched over the coming two years.

“Management believes that the Singapore property market has found a steady state at current levels and the increase in industry sales volume has been encouraging,” Tan said. She added that the launch of 45 Amber Road, Nanak Mansions, and Raintree Gardens will be keenly watched given the group’s dwindling land bank.

Given that, UOL still derives a significant 47-58% of its revenues from retail, office, and hotel segments which should continue delivering stable cashflows in the coming years. “Whilst we see headwinds in both the retail and office segments ahead, we believe that the positioning and location of UOL’s portfolio of commercial properties, mainly along the fringe areas of the CBD, will result in lower volatility in rents,” Tan said.

United Industrial Corp’s (UIC) portfolio of investment properties are “complementary” to the group’s exposure in largely city fringe properties as a majority of the group’s properties are located in the central business district (CBD), Tan noted. “With close to around 21% of the space up for renewal in 2018, the tight competitive supply within the CBD will, in our view result in potentially stronger rental reversionary prospects,” she added.

UOL’s retail malls United Square and Novena Square have also formed a niche as they are near an emerging medical hub, which should result in high tenant stickiness.

“This is especially so for United Square, which houses tenants well known for providing various children’s education programmes. On the other hand, Novena Square’s tenant mix mainly caters to necessity shopping and the needs of the vicinity’s growth as a medical hub,” Tan added.

Meanwhile, hospitality growth will be driven by the acquisition of Pan Pacific Melbourne in 2017 whilst performances from hotels and serviced residences are expected to turn up on the back of stronger economic growth driving business travel.

Tan expects portfolio RevPAR to improve to the tune of around 3% in 2018. She noted that the company is also revamping Pan Pacific Hotel Orchard into a 340- room ‘green hotel’, completing in 2021.