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UOL Group Limited’s Latest Earnings: Shares Are Down 30%, So What’s Next?

UOL Group Limited (SGX: U14) reported a respectable set of results for its third quarter against a backdrop of a difficult operating environment for property stocks due to the Singapore government’s cooling measures. UOL’s stock price has seen a pull-back of over 30% year-to-date.

UOL is a Singapore listed property company with over S$20 billion of assets under management. The property group has its wings spread across many aspects of the property market such as property development, property investments and hotels operations.

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Here are the important points to take note of from UOL’s latest earnings report.

The key numbers

UOL’s revenue for the quarter was down 3% to S$523.8 million while gross profit grew 40% to S$234.9 million.

Looking at the breakdown, the property development segment experienced a pull-back in revenue to the tune of 43% on year. The decline happened on the back of lower revenue recognition from development projects.

On the positive side, the Property Investment and Hotel Operations segments saw an increase in revenue of 60% and 26% respectively. Both segments saw increases on the back of consolidation of investment properties from United Industrial Corporation Ltd (SGX: U06). Finally, investments grew by 46% due to higher dividend contributions from United Overseas Bank Ltd (SGX: U11) while management services & technologies saw growth of 164% year on year.

Source: UOL third-quarter presentation slides

UOL’s attributable profit to equity holders (before fair value changes and exceptional items) increased by 5% year on year to S$92.8 million. If fair value changes and exceptional items are included, net profits decreased by 85% compared to a year ago. The big drop in net profits is due to the absence of other gains seen in the same period of the prior year.

UOL’s earnings per share (EPS) fell by 85% from S$0.75 to S$0.11 year on year.

Moving on, the property conglomerate saw its net asset value (NAV) per share increasing 2% to S$11.24 compared to 31 December 2017. Lastly, UOL saw its financial position for the quarter weakening compared to 31 December 2017 with net debt increasing from around S$3.0 billion to S$3.98 billion and its net gearing ratio rising from 0.21 to 0.28 over the same period.

Looking ahead

In its earnings release, UOL commented on its current quarter and provided its outlook:

“UOL said the cooling measures introduced in July have affected sentiment in the Singapore residential property market”

“Notwithstanding, the launched projects, Amber45, and The Tre Ver, have achieved healthy sales of close to 70% and 30% respectively. Office rents, on the other hand, are expected to be on the uptrend given the strong demand from a wide range of sectors coupled with limited new supply. Retail rents remain soft as the retail scene continues to evolve due to the challenges from e-commerce and manpower shortage.”

“While the property market in London continues to be affected by political uncertainties due to Brexit, the office rental market in Midtown remains steady.”

“UOL noted that total visitor arrivals in Singapore for the first eight months of 2018 grew by 7.5% to 12.6 million, which should benefit the Group’s hotels in Singapore. The hospitality sector in the Asia Pacific is expected to benefit from the improving economic conditions, though trading conditions for the Group’s hotels in Myanmar and the People’s Republic of China remain competitive.”

The Foolish conclusion

At the end of trading on Tuesday, UOL’s stock closed at S$6.18 per piece, translating to a price-to-book ratio of 0.55. The property group’s dividend yield at current prices was 2.8%.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay owns shares in United Overseas Bank.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has a recommendation for United Overseas Bank. The Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.