UOL sees challenging Singapore outlook, diversifies overseas

Singapore

UOL Group, which saw net profit for 2014 dragged by lower fair value gains, flagged a more challenging outlook this year for the residential and retail sectors in Singapore, citing it as a reason for its recent efforts to diversify its predominantly local portfolio.

Group president (property) Liam Wee Sin told reporters and analysts on Thursday that the group will selectively increase its investments overseas, particularly in countries where it is already present, while continuing to tender for residential sites in good locations in Singapore. "In the case of our hotels acquisitions, we will consider going into major gateway cities," he said. "At the same time, we will continue to refresh our hotel assets to stay competitive through asset enhancement initiatives."

The 13 per cent drop in net profit for the full year ended Dec 31, 2014, to S$686 million was mainly due to lower fair value gains. Excluding fair value and other gains, its pre-tax profit rose 21 per cent to S$515.2 million on higher revenues, lower finance expenses and higher share of profits from associated and joint venture companies.

While Singapore accounted for 89 per cent of UOL's total asset value at S$11.9 billion, up from 87 per cent in 2013, it only accounted for 48 per cent of UOL's revenue, down from 73 per cent in 2013 due to waning development sales.

Group revenue last year rose 29 per cent to S$1.36 billion, bolstered by a one-off gain from the sale of land at Jalan Conlay in Malaysia and revenue recognition from the completion of The Esplanade development in Tianjin, China.

Its property development business rose 65 per cent in revenue from a year ago to S$675.9 million, thanks to the S$220.1 million revenue recognition from the Jalan Conlay land sale and S$213.5 million in revenue from the newly completed The Esplanade in Tianjin, China.

Under its hospitality segment, revenue contribution from hotel ownership and operations rose 4 per cent to S$437.6 million while revenue from hotel and other management services slipped one per cent to S$20.3 million.

Pan Pacific Hotels Group chief executive Bernold Olaf Schroeder said that revenue per available room (RevPar) in Singapore marked a 12 per cent rise last year to S$217 - the biggest jump across markets.

UOL's revenue from property investments last year rose 10 per cent to S$198.2 million with the opening of the OneKM mall in Paya Lebar in Q4 and from the full-year operations of Pan Pacific Serviced Suites Beach Road.

But OneKM mall, which is 95 per cent occupied, has seen lower than expected footfall. Mr Liam said he expects retail rents to be flat this year as challenges from manpower crunch and online shopping have prompted retailers to close unprofitable stores.

As for the office segment, however, rents are expected to rise by 5-10 per cent this year given low vacancy rate and limited supply this year, Mr Liam said.

Citing a plunge in transaction volumes last year, Mr Liam reckoned that many of the potential buyers have deferred their purchases. "But having said that, our experience on the ground is that a strong product with superior location attributes and the right price can prove to be resilient," he added.

UOL's Thomson Three, launched right after the total debt servicing ratio (TDSR) was implemented, has sold 97-98 per cent of all units to-date. Its 186-unit freehold project Seventy St Patrick's was 79 per cent sold since its launch in September 2014. But its Riverbank@Fernvale has seen slower sales, with 53 per cent of its 555 units sold since February 2014. Mr Liam said the group is not slashing prices there to move sales.

This year, UOL will be launching two other residential projects in Singapore that could yield a total of 1,460 units. The 797-unit Botanique at Bartley is slated for launch in Q1 while the Prince Charles Crescent site may be launched in the second half.

Elsewhere, the group's mixed development in Shanghai's Changfeng comprising 398 residential units and 4,000 sq m of net lettable retail space is targeted to launch in the second half of this year. UOL is reviewing the scheme for its mixed development in London, its first foray in Europe, to intensify the number of rooms for the Pan Pacific-branded hotel and the number of residential units.

Shares of UOL slipped one per cent on Thursday to S$7.73. The group announced a first and final dividend of of 15 cents a share for the full year.