UOL H1 profit falls 63.6% due to lower fair-value gains on investment properties

PROPERTY and hospitality group UOL Group on Thursday (Aug 10) posted a 63.6 per cent fall in net profit to S$135 million for the six months ended Jun 30, 2023, from S$371 million that it posted in the corresponding period a year earlier.

This came as revenue fell 11 per cent to S$1.4 billion over the same period, from S$1.5 billion in the year-ago period.

In its bourse filing, the group attributed the fall in net profit to significantly lower attributable fair value gains on its investment properties of S$3.5 million in the first half of the year, against S$190 million over the same period last year.

Earnings per share for the period stood at S$0.1599, compared with S$0.4394 in the same period the year before.

The group noted that revenue from its property development segment fell 32 per cent to S$676.3 million due to lower contributions from Avenue South Residence and The Tre Ver in Singapore, as well as Park Eleven in Shanghai.

Still, the decline in the segment was partly offset by higher progressive revenue recognition from AMO Residence and The Watergardens at Canberra in Singapore.

On its outlook for the segment, UOL expects growth to be subdued by property cooling measures, macroeconomic headwinds and a higher supply of homes in the next 12 months.

Group chief executive Liam Wee Sin also predicts that sales rates during launch weekends will return to a “more normalised rate” of 25 per cent to 50 per cent. 

The higher sales rates witnessed last year – of 60 per cent and above – were primarily due to low unsold inventory and launch pipeline then, he said. “To give a sense… developers have launched to date about 6,300 to 6,500 units, excluding executive condos (ECs); as against 4,528 units for the whole of 2022.”

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“And developers have sold to date about 4,800 to 5,000 units, excluding ECs, as compared to 7,099 units for the whole of 2022,” he added. 

In terms of land stock, Liam highlighted that the group’s successful tender of the Tampines Avenue 11 site last month meant it has “replenished” its stock in the suburban Outside Central Region, which is still in tight supply. 

The five-hectare site, which is slated to launch in the second half of 2024, will be one of the largest integrated retail cum residential developments with a transport hub and direct MRT connectivity, he said. 

Meanwhile, revenue from the hotel operations segment rose 66 per cent to S$341.5 million as these benefited from a rebound in tourism, with such properties in Singapore recording the largest increases, the group said.

UOL group chief executive Liam Wee Sin said that the group continues to review its hotel portfolio and hopes to unlock value at an “opportune” time. In July, it had entered into an agreement to sell Parkroyal on Kitchener Road to an entity of Worldwide Hotels, the owner of Hotel 81 in Singapore, for S$525 million.

The group also noted that finance expenses rose 101 per cent to S$93.9 million, and said this was due to the steep increase in interest rates, as well as new loans drawn. The new loans went towards redevelopment and asset enhancement initiatives at different properties, as well as to bid for new sites.

“Consequently, the weighted average interest rate on group external borrowings was 3.46 per cent in 1H23 against 1.74 per cent for 1H22,” the group said.

UOL shares closed up 0.3 per cent, or S$0.02, at S$6.94 on Thursday, before the results were released.