Is UOL Group Ltd An Attractive Stock Right Now?

UOL Group Ltd has its roots traced back to 1963. In that year, Faber Union (HK) Ltd had incorporated Faber Union Ltd and subsequently, listed the company on the SGX in 1964.

Nine years later, Wee Cho Yaw, a prominent banker in Singapore, had acquired a controlling stake in Faber Union Ltd. In 1975, Wee has renamed the company to United Overseas Land Ltd. Then, in 2016, the company was renamed to UOL Group Ltd. As of 30 June 2018, UOL Group Ltd has reported having total assets worth S$ 19.9 billion and thus, is a leading property corporation in Singapore.

In this article, I’ll share UOL Group Ltd’s past performances, its future projects, and tools to evaluate the stock as an investment. Thus, here are 8 main things that you need to know about UOL Group Ltd before you invest.

#1: Stock Symbol

Ticker Symbol: SGX: U14

Market Capitalization: S$ 5.80 billion (3 September 2018)

Share Price: S$ 6.89 (3 September 2018)

Industry: Property

#2: The Business

In brief, UOL Group Ltd derives income from 4 key business segments:

1. Property Development
   It is involved in multiple projects located mainly in Singapore, including joint venture projects and projects by United Industrial Corporation Ltd (UIC). In 2017, this segment had contributed S$ 1.17 billion in revenues and S$ 133.9 million in operating profits.  
2. Property Investment
   It owns 14 commercial offices where seven are held under UOL Group Ltd and the other seven are held under UIC. In addition, it owns a total of five shopping malls and four serviced suite properties located across Singapore. In 2017, this segment has made S$ 327.1 million in revenue and S$ 218.0 million in operating profits. Hence, it is the largest income contributor to UOL Group Ltd presently.  
3. Hotel Operations
   It has 34 hotels where 19 are operating under the Pan Pacific brand, 13 operating under PARKROYAL and the remaining two hotels under other brands. In 2017, this segment has made S$ 526.2 million in sales and S$ 40.5 million in operating profits.
   
   
4. Investments in Securities
   UOL Group Ltd owns 2.3% shareholdings of United Overseas Bank Ltd, one of the top 3 listed banks on the SGX. Its shareholdings were valued at S$ 1.03 billion as at 31 December 2017 and had contributed S$ 29.8 million in gross dividends to UOL Group Ltd in 2017.

#3: Financial Results

Excluding the exceptional year of 2011, UOL Group Ltd had recorded continuous growth in revenues over the last 10 years. It has grown from S$ 899.2 million in 2008 to S$ 2.10 billion in 2017. This had resulted in a much stable profit before tax (PBT) before fair value and other gains where it maintained at S$ 400 – 500 million per annum since 2009. Its basic earnings before fair value & other gains were maintained at 40.0 – 50.0 cents per share over the last 5 years.

Source: Annual Reports of UOL Group Ltd

#4: Balance Sheet Strength

As of 30 June 2018, UOL Group Ltd has reported non-current liabilities of S$ 3.3 billion. Thus, its gearing ratio is 35.0%. It has a cash balance of S$ 739.7 million and the current ratio of 1.95. Thus, UOL Group Ltd remains a healthy balance sheet and is capable of funding its working capital and projects for future growth.

#5: Future Projects:

Here are the key highlights of UOL Group Ltd moving forward:

Property Development:

As of 30 June 2018, UOL Group Ltd has the following ongoing projects:

It intends to launch the following projects:

Property Investments

As of 31 December 2017, UOL Group Ltd had enjoyed above 90% in occupancy rate for its property investments in Singapore. The exceptions are the Gateway (89%) and Marine Square Shopping Mall (84%).

In total, UOL Group Ltd has a portfolio of investment properties worth S$ 10.93 billion and would continue to derive income from them in the future.

Hotel Operations

As of 30 June 2018, UOL Group Ltd has 34 hotels in operations. In addition, the conglomerate has 8 hotel development projects in its pipeline. Presently, UOL Group Ltd is embarking on several key projects which include:

#6: Valuation

As I write, UOL Group Ltd is trading at S$ 6.89 a share. Thus,

1. P/E Ratio
   Its basic earnings before fair value and other gains in 2017 were 43.50 cents a share. Thus, its P/E Ratio is 15.84.  
2. P/B Ratio
   As of 30 June 2018, UOL Group Ltd has reported net asset value (NAV) a share of S$ 11.34. Thus, its current P/B Ratio is 0.61.  
3. Dividend Yields
   In 2017, UOL Group Ltd has paid out 17.5 cents in dividends per share (DPS). Thus, its dividend yield is 2.54% if the company decides to keep its DPS at 17.5 cents for 2018.

#7: Investors Relation

For more inquiries related to shareholders’ matters, please contact:

Website: https://www.uol.com.sg/investors-and-media/overview/

#8: Major Shareholders

As of 8 March 2018, the major shareholders and their interests in UOL Group Ltd are as followed:

– C.Y. Wee & Company Private Limited: 13.68%

– Wee Investments (Pte) Limited: 13.17%

 

Note:

Wee Cho Yaw is the ultimate largest shareholder of UOL Group Ltd with a total direct and indirect shareholdings of 35.84%. Wee is appointed as Chairman of UOL Group Ltd.

VIA’s Verdict

With limited projects-in-hand, UOL Group Ltd would continue to rely on its key investment properties for recurring income in the future. With high occupancy rates for these properties, they would act as an income stabilizer to the group.

Overall, UOL Group Ltd had delivered consistent dividends to its shareholders. At the current price of S$ 6.89 a share, its dividend yield is 2.54% if it keeps DPS at 17.5 cents.

UOL Group Ltd has achieved a CAGR of 11.40% at its stock price over the past 8 years. It is comparable with its CAGR in net asset value (NAV) of 9.85% in that 8 years. Hence, ‘Growth’ in NAV leads to ‘Growth’ in stock prices. The increase in NAV is influenced by its fair value gains (or capital appreciation) on its property investment and thus, would influence the rate of future capital growth of the stock price of UOL Group Ltd in the future.

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