UOL Warns Of Headwinds

UOLLogoUOL Group Limited (SGX: U14) saw its revenue for second quarter rise slightly, up 2% to $304m. The improvement was attributed to “higher contributions from hotel operations, property investments and higher dividend income from quoted investments.

For the second three months of 2013, gross profit margin was 49%, which is an improvement on the 43% margin recorded last year. This was mainly due to lower revenue contribution from property development which has a higher cost margin. Additionally, the company benefitted from higher profit margins for on-going property development projects.

The pre-tax profit before fair value and other gains for the quarter was $115m compared to $99.7m last time. The 16% improvement was due to “higher profit margins, lower marketing and distribution expenses and higher share of profit of joint venture companies.

The revenue for the first half of the year was $552m, a drop of 7% over the previous year. In the first six months of the year, the company achieved a pre-tax profit before fair value and other gains of $207m. This was unchanged from last year.

The diluted earnings per share for the second quarter were 55.94 cents versus 22.33 cents last year. UOL’s gearing ratio decreased to 0.25 from 0.28 at the end of December.

The company sees some headwinds ahead. It said, “The recent introduction of a debt servicing framework for property loans would likely dampen demand for residential properties. Rentals of office space which rose marginally by 0.2% in second quarter 2013, are expected to be stable. The retail leasing market is expected to be muted as retailers hold back expansion plans in the face of labour shortage.

UOL added: “The increase in the supply of hotel rooms and the restrictions on foreign labour will affect the performance of the Group’s hotels and serviced suites in Singapore. The economic uncertainties in the developed economies will continue to affect hotel occupancy and average room rates in the Asia Pacific region.

No dividends were declared for 2Q 2013. The shares closed at $6.65 on 7 August 2013.

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