UOL Group Limited’s Latest Earnings: A Cautious Outlook

UOL Group Limited (SGX: U14) reported in its third quarter earnings last Thursday. The reporting period was for 1 July 2016 to 30 September 2016.

UOL Group became a blue chip stock in September 2015 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 group 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 2016, UOL Group revenue rose by 11% year on year to $393.4 million.
  2. Share of profit from associated companies went from a profit of $10.3 million a year ago to a loss $3.9 million in the reporting quarter.
  3. As such, net profit decreased by 13% year on year to $91.5 million.
  4. Profit before fair value gains, which strips away fair value gains, was also down 13% year on year to $100.8 million.
  5. Earnings per share (EPS) experienced a 14.5% decrease from 12.75 cents in the third quarter of 2015 to 10.90 cents per share in the reporting quarter.
  6. For the third quarter of 2015, cashflow from operations was $99.2 million with capital expenditure clocking in at $3.5 million. This gave UOL Group positive free cash flow of $95.7 million.  
  7. As of 30 September 2016, UOL Group had $265.1 million in cash and equivalents and $2.57 billion in borrowings. This is an improvement from a year ago when UOL Group had $283.6 million in cash and equivalents and $2.85 billion in borrowings.
  8. UOL Group had a net tangible asset value per share of $9.91, relatively unchanged from the $9.89 it had at the end of last year.  

In summary, UOL Group saw both its topline grow but bottom-line slip compared to the same quarter last year.

On the other hand, the real estate giant generated good 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 rose across the board. Property Development sales rose 19% from $174 million recorded a year ago to $206.6 million in the reporting quarter. Revenue from property investments rose by 2% year on year to $57.5 million. Meanwhile, revenue from its Hotel Operations rose by 4% year on year to $110.3 million.

UOL Group sounded a cautious note for the outlook ahead:

“Singapore’s GDP growth for third quarter 2016 eased to 0.6% on a year-on-year basis from the 2.0% growth in the previous quarter. The Ministry of Trade and Industry expects full-year GDP growth to be between 1.0% and 2.0%.”

“The decline in prices of private residential properties in Singapore accelerated to 1.5% in third quarter 2016 compared with the 0.4% decline in the previous quarter. Demand for new homes is expected to remain sluggish. The large influx of upcoming supply in the next one to two years coupled with soft demand will put pressure on office rentals. Retail rents are likely to remain subdued as the market is still undergoing structural changes.”

“The weak global economic outlook will continue to weigh on the performance of the Group’s hotels.”

Foolish summary

At its closing price last Thursday of $5.70, UOL Group traded at a price to book of 0.58 times.

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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.