UOL’s 1HFY2023 earnings down 64% y-o-y to $135 mil mainly on lower fair value gains

By Felicia Tan,

The Edge Singapore

/ EdgeProp Singapore |

August 10, 2023 9:45 PM SGT

UOL Group sees office leasing sentiment in Singapore turning cautious due to the lower projected economic growth (Photo: Samuel Isaac Chua/EdgeProp Singapore)

UOL Group U14 0.58% has reported earnings of $135 million for the 1HFY2023 ended June, 64% lower than the earnings of $371.0 million in the corresponding period the year before.

The reduced earnings were attributed mainly to the 98% drop in attributable fair value gains on investment properties. During the period, UOL reported attributable fair value gains on its investment properties of $3.5 million against $190 million for the same period last year.

Revenue for the 1HFY2023 fell by 11% y-o-y to $1.37 billion as the decline in the revenue from the group’s property development offset the growth in revenue from its hotel operations.

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UOL’s property development revenue fell by 32% y-o-y to $676.3 million mainly due to lower contributions from Avenue South Residence, The Tre Ver, Park Eleven Shanghai and partly offset by higher progressive revenue recognition from AMO Residence and The Watergardens at Canberra.

Revenue from its hotel operations grew by 66% y-o-y to $341.5 million as almost all of the group’s hotels benefitted from the return of travel.

The group’s hotels in Singapore, especially, saw the largest y-o-y increases. This was followed by Parkroyal Collection Kuala Lumpur which opened in June 2022, Pan Pacific London and Parkroyal Darling Harbour in Sydney.

UOL sold its 542-room Parkroyal on Kitchener Road for $525 million to Worldwide Hotels Group, owned by Hotel 81 (Photo: Albert Chua/EdgeProp Singapore)

Occupancy rates for its hotels in Singapore, Oceania and others, stood at 66%, 68% and 59% respectively. Other markets under its hotels segment refers to its properties in China, Vietnam, Malaysia, Myanmar and the UK. It did not include the hotel in Kuala Lumpur which opened on Dec 1, 2022.

Revenue per available room (RevPAR) for its hotels in Singapore, Oceania and others stood at $212, $147 and $89; up from $140, $109 and $51 respectively.

UOL’s gross profit dipped 1% y-o-y to $503.2 million in 1H2023, while gross profit margin stood at 37%, four percentage points higher y-o-y. The higher gross profit margin was due to higher investment income and improved performance of the hotel operations.

The group recorded a total share of loss of associated and joint venture (JV) companies of $3.4 million compared to the total share of profit $15.8 million in the year before. This was due mainly to lower contributions from Meyer House in Singapore which was completely sold, and Mandarin Oriental Singapore which was closed for renovations in March 2023.

As at June 30, the group’s committed occupancy for its Singapore office portfolio stood at 90.0% while occupancy rates for its UK office portfolio came in at 84.5%. Its Australian office portfolio was at 100.0% for the period. UOL’s committed occupancy for its retail portfolio stood at 99.1% as at June 30.

Cash and cash equivalents stood at $1.658 billion during the period. However, higher interest rates have doubled its average borrowing costs to 3.46% in 1H2023, from 1.74% a year ago. However, its gearing ratio remains at 0.26.

The 347-room Pan Pacific Orchard opened in June (Photo: UOL Group)

“We have been proactively engaged in asset management and asset enhancement initiatives of our existing commercial portfolio while looking for acquisition opportunities,” says UOL group chief executive Liam Wee Sin.

In June, UOL opened its 23-storey, 347-room Pan Pacific Orchard designed by acclaimed WOHA Architects. A month later in early July, UOL announced that it has sold its 542-room Parkroyal on Kitchener Road for $525 million to Worldwide Hotels Group, owned by Hotel 81. It’s considered the biggest hotel deal in Singapore this year so far.

“We continue to review our hotel portfolio with the view of unlocking value at an opportune time,” says Liam.

On June 27, a consortium of UOL Group, Singapore Land Group (SingLand) and CapitaLand Development submitted a top bid of $1.206 billion for a 5ha, mixed-use development site at Tampines Avenue 11, in a government land sales (GLS) tender. The consortium was a 50:50 joint venture between UOL-SingLand and CapitaLand. The bid price works out to $885 psf per plot ratio (psf ppr).

“Our 50% stake in the recent acquisition of a mixed retail cum residential site in Tampines replenishes our pipeline of residential units in the Outside Central Region,” says Liam.

The mixed-use commercial and residential site that UOL Group, Singapore Land Group and CapitaLand Development jointly purchased for $1.206 billion at the end of June (Source: EdgeProp Landlens)

The group sees office leasing sentiment in Singapore turning cautious due to the lower projected economic growth. The retail and hospitality sectors remain the only bright spots with the recovery of visitor arrivals. Retail rents are expected to remain supported by the low pipeline supply of spaces while the hospitality sector is likely to benefit the group’s hotels thanks to a continued pick-up in leisure and corporate travel.

UOL expects its growth to be dampened by the property cooling measures unleashed on April 27, macroeconomic headwinds and a higher supply of new homes in the next 12 months.

The April 27 cooling measures saw additional buyer’s stamp duty (ABSD) for foreigners double to 60% from 30% before. ABSD for Singaporean and Permanent Resident (PR) residential property investors were also raised.

With the government ramping up supply, and a slew of new launches this year – 17 new launches to date – the housing situation has “stabilised”, says Liam. “We’re going back to a more normalised rate of 25% to 50% sales in the launch weekend.”

Last year, the housing market benefited from low unsold inventory and a limited launch pipeline post-Covid. Hence, new launches in 2022 achieved sales of 60% and above during the launch weekend, notes Liam.

This year to date, developers have launched 17 private residential projects with a total of 6,300 to 6,500 units (excluding ECs). Pictured here is the crowd on the first day of UOL Group in early July (Photo: UOL Group)

For the whole of 2022, developers launched 17 private residential projects (excluding executive condos or ECs) with an estimated total of 4,528 units. Developer sales last year amounted to 7,099 units. This year to date, developers have launched 17 private residential projects with a total of 6,300 to 6,500 units (excluding ECs). Developers have sold an estimated 4,800 to 5,000 units so far, according to UOL.

After the recent cooling measure, UOL’s Liam reckons about 98% of residential property buyers at new launches are Singaporeans and Permanent Residents (PRs).

“Given that the market has shown signs of stabilisation and prices have moderated, it’s perhaps timely to consider extending the same ABSD remission period for EC buyers to private condo buyers,” says Liam. He points out that this appeal to the government has been made by the Real Estate Developers’ Association of Singapore (REDAS) “several times” in the past.

Currently, EC buyers do not need to pay ABSD upfront and are given six months to dispose of their existing HDB flats upon collecting the keys to their new EC unit upon obtaining a Temporary Occupation Permit (TOP). “This helps them to transition smoothly and achieve their aspirations on upgrading,” Liam explains.

On the other hand, private condo buyers have to pay 20% ABSD within 14 days of purchase and dispose of their HDB flats within six months. “This can be disruptive to families,” Liam says. “It also causes undue distortion in the residential rental market which could be a drawback in the attractiveness of Singapore as a talent hub.”

The former Watten Estate Condo will be redeveloped into the luxury, 180-unit Watten House with its private preview scheduled for October (Photo: Samuel Isaac Chua/EdgeProp Singapore)

UOL launched its 520-unit Pinetree Hill at Pine Grove in mid-July, and the project is 29% sold at an average price of $2,383 psf. The 99-year leasehold project is located off Ulu Pandan Road in District 21.

In the pipeline for launch is the freehold, 180-unit Watten House on Shelford Road in prime District 11. The new luxury, low-rise condo is a redevelopment of the former Watten Estate Condo which UOL and SingLand jointly purchased for $550.8 million or $1,723 psf ppr including an 8% bonus gross floor area and development charge.

Liam says sales of Watten House will be done via private preview in October – “similar to what we did for MeyerHouse”. The 56-unit MeyerHouse on Meyer Road in prime District 15, was previewed in March 2019 and was fully sold by December 2022.

The mixed-use development site at Tampines Avenue 11 can yield 1,190 residential units and is scheduled for launch in 2H2024. “It will be one of the largest integrated developments with a transport hub and direct MRT connection,” says Liam.

Shares in UOL closed 2 cents higher or 0.29% up at $6.94 on Aug 10.

With updates by Cecilia Chow

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