UOL Group Limited’s Latest Earnings: Cloudy Outlook Ahead

UOL Group Limited (SGX: U14) reported its fiscal third-quarter earnings yesterday evening. The reporting period was for 1 July 2015 to 30 September 2015.

UOL Group became a blue chip stock only recently in late September when it assumed a new role as one of the 30 constituents of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI). The company is in the business of real estate and has three main operating segments, namely, Property Development, Property Investment, and Hotel Operations.

To learn more about the company, go here.

Financial highlights

The following’s a quick take on UOL Group’s latest financial figures:

  1. For the third quarter of 2015, revenue for UOL Group fell by 18% year-on-year to $354 million.
  2. Net profit decreased by 3% to $104.8 million from a year ago.
  3. Attributable profit before fair value gains was also down 3% year-on-year to $97.9 million.
  4. Elsewhere, UOL Group’s share of profit from associated companies rose 12% to $34.5 million.
  5. With the lower net profit, UOL Group’s earnings per share (EPS) experienced a 3.5% decrease from 13.21 cents per share in the third quarter of 2014 to 12.75 cents per share in the reporting quarter.
  6. For the third quarter of 2015, cash flow from operations was $82.9 million with capital expenditures clocking in at $12.6 million. This gave UOL Group positive free cash flow of $70.3 million. In the same period last year, UOL Group’s cash flow from operations was a negative $539.8 million, so there had been an improvement in the reporting quarter.
  7. As of 30 September 2015, UOL Group had $283.6 million in cash and equivalents and $2.85 billion in borrowings. This is a slight improvement from a year ago when the selfsame figures were $270.7 million and $3 billion, respectively.
  8. UOL Group ended the reporting quarter with a net asset value of S$9.77 per share, up 5.2% compared to a year ago.

In summary, UOL Group saw both its top-line and bottom-line shrink compared to the same quarter last year.

On the other hand, the real estate giant generated positive free cash flow for the quarter. Given that UOL Group maintains a sizable amount of debt on its balance sheet, we should continue to keep an eye on its ability to generate free cash flow.

Operational highlights

Quarterly revenue for UOL Group fell mainly due to weaker revenue from its Property Development segment. Sales for the segment shrank 33% from $260.9 million recorded a year ago to $174 million in the reporting quarter. The previous corresponding period was lifted by the Esplanade project in Tianjin.

Revenue from Property Investment rose by 16% year-on-year to $56.4 million, partially offsetting the decline experienced in the Property Development segment. The Property Investment segment’s top-line benefitted from the contribution from OneKM mall. Meanwhile, gross revenue from Hotel Operations had eased by 4% year-on-year to $105.6 million.

Elsewhere, UOL Group’s dividend income from available-for-sale assets also contributed $13.1 million to its overall revenue.

In the earnings release, the company had sounded a cautious note for the outlook ahead:

UOL notes that Singapore residential sales volume during the first nine months in 2015 was similar to the same period in 2014 and expects buying sentiment to remain muted with interest concentrated on new launches.

The Group foresees office rentals to face pressure due to impending supply and the slowing economy while retail rents could soften in view of the tight labour market and competition from online retail. With the subdued economic outlook in Asia Pacific, the Group also expects challenging times ahead for the hospitality sector.

Foolish summary

At its closing price yesterday of $6.46, UOL Group traded at 8.8 times its trailing earnings and offers a trailing dividend yield of 2.3% (87.92 cents + 15 cents). The real estate outfit is also priced at 0.66 times its latest net asset value.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.