UOL reports earnings recovery, says higher costs could stymie margins

By The Edge Singapore

/ EdgeProp Singapore |

February 28, 2022 7:43 PM SGT

Artist’s impression of Avenue South Residence, the world’s tallest PPVC residential development built using the prefabricated prefinished volumetric construction method (Photo: UOL)

SINGAPORE (EDGEPROP) - Singapore-listed developer UOL Group reported a net profit after tax of $307.4 million in FY2021, compared with just $13.1 million in FY2020. The company said this was mainly due to fair value and other gains of $73.8 million, compared to fair value and other losses of $246.7 million in FY2020.

Group pre-tax profit before fair value and other gains/losses amounted to $450.9 million, up 2% y-o-y from $443.2 million in FY2020. Group revenue for the full year rose 32% y-o-y to $2.6 billion with higher contributions from property development and hotel operations.

Property development saw the biggest revenue increase of 67% to $1.6 billion on higher progressive revenue recognition from Avenue South Residence, The Tre Ver, Clavon and The Watergardens at Canberra in Singapore and revenue recognition from sales of units at The Sky Residences in London

Revenue from hotel operations grew 14% y-o-y to $282 million, primarily due to the reopening of Parkroyal Collection Marina Bay after nine months of refurbishment. In addition, revenue was also contributed by Pan Pacific Perth securing a government quarantine facilities contract, as well as the opening of Pan Pacific London last September.

Meanwhile, revenue from property investments stayed relatively flat at $502.2 million, down 0.2% y-o-y, while revenue from technology operations fell 13% to $197.3 million, arising from lower sales of information technology due to a delay in fulfilling orders because of global supply constraints.

In terms of its operation highlights, UOL chief executive Liam Wee Sin notes that the group refreshed its landbank in 2021 with the purchase of a government land sales site at Ang Mo Kio Avenue 1 for $381.4 million of $1,118 psf in June, as well as the en-bloc purchase of Watten Estate Condominium for $550.8 million in October. (See potential condos with en bloc calculator)

According to Liam, the project at the Ang Mo Kio site could be launched sometime in June, while the project at Watten Estate Condominium could be launched in 2023. (Browse newly launched condos in Singapore right now)

Meanwhile, it recently topped out its Avenue South Residence project on Feb 25. The towers are the world’s tallest residential development built using the prefabricated prefinished volumetric construction (PPVC).

For its property investments, its retail portfolio has a committed occupancy of 92.9% as of 2H2021, up from 90.6% as of 1H2021. For its office portfolio, committed occupancy as of 2H2021 stood at 91.3% for Singapore office properties, a slight decline from 93.7% in 1H2021. Committed occupancy for its UK and Australia office properties stood at 91.4$ and 100% respectively. (Check all latest Singapore property Market Trends)

UOL also received in-principle approval from URA to develop its 333 North Bridge Road site, which it had acquired in December 2019. The new seven-storey building is an extension of Odeon Towers and will 7,320 sq m of gross floor area (GFA), comprising offic space, retail and F&B. Construction will start in 1Q2022, with completion target in two years.

For its hotel operations, projects in the pipeline include the 347-room Pan Pacific Orchard which will open in 1H2023, the 158-room Pan Pacific Jakarta that will open in 2H2023. In KL, the 535-room Parkroyal Collection Kuala Lumpur, which was closed for refurbishment, will reopen if 1H2022.

UOL has also received in-principle approval for the redevelopment of Faber House into a 250-key hotel spanning 18-storeys with a GFA of 11,025 sq m. Construction works will start in 1H2023, with completion targeted in 1H2026.

Looking ahead, Liam says there are still underlying issues including rising business costs and supply chain disruptions that may impact the company’s performance.

In a media briefing on Feb 28, he notes that breakeven costs have gone up. “Supply chain disruption and construction costs add to total breakeven cost for any development. For developers, momentum of sales were good but there was an increase in pricing of 10% due to rising costs and these also compressed our margins,” he says. This is despite having locked in most of the construction costs for most of UOL’s projects.

“The supply chain and cost of raw material will escalate because of the war and making the built environment sector very challenging,” Liam adds.

UOL has proposed a first and final dividend of 15.0 cents per share.

Check out the latest listings near Avenue South Residence, The Tre Ver, Clavon, The Watergardens at Canberra, Ang Mo Kio, Watten Estate Condominium, Odeon Towers

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