UOL net profit surges as it embraces UIC into its fold

By Kalpana Rashiwala

SINGAPORE - UOL Group has posted a 609 per cent jump in net profit to S$618.1 million for the third quarter ended Sept 30.

This is on the back of a S$542.1 million gain on acquisition and consolidation arising from accounting for United Industrial Corporation (UIC) as a subsidiary.

This follows UOL's acquisition of 60 million UIC shares from Haw Par Corporation, which was completed on Aug 31 this year.

Following the purchase, UOL's stake in UIC has risen to 48.96 per cent from 44.71 per cent previously.

"The gain on acquisition and consolidation arose from the application of the accounting standards on business combinations which require the acquirer when buying a business to allocate the purchase price into the fair value of the various assets and liabilities acquired from the transaction," UOL said in a statement.

"As a result of this exercise, UOL recorded a fair value uplift of S$421.1 million to property, plant and equipment, which would result in higher depreciation in future; and a S$82.3 million fair value uplift to development properties which will lead to less development profit to be recognised for certain development projects in future."

The S$421.1 million boost is mainly for three hotels in the Marina Centre area - Pan Pacific, Marina Mandarin and Mandarin Oriental, while the S$82.3 million gain relates to The Clement Canopy condo in Singapore and Park Eleven project in Shanghai.

Net profit, excluding other gains, amounted to S$90.9 million, up 8 per cent.

The increase was due mainly to higher profit from property development and property investment as well as higher contributions from joint-venture companies.

Group revenue climbed 37 per cent to S$537.9 million, due mainly to the consolidation of UIC, and the associated and joint venture companies of UOL and UIC, which contributed an additional S$144.3 million in revenue.

Excluding the effects of this consolidation, progressive recognition of revenue from development properties was lower by S$6 million or 3 per cent, following the completion of Riverbank@Fernvale in March this year.

On the other hand, revenue from hotel operations improved by 5 per cent or S$5.5 million with new revenue from the Melbourne hotel; its acquisition was completed in late July this year.

Net asset value per share rose to S$10.95 as at Sept 30, from S$10.10 as at Dec 31.

The counter ended three Singapore cents higher at S$8.80 on Thursday. UOL announced its results after the market closed.

Group gearing ratio inched up to 0.25 at the end of September 2017 compared to 0.24 on Dec 31 as higher borrowings of the consolidated group were largely offset by the increase in total equity.

UOL said that Singapore office rents are expected to stabilise on the back of a more positive economic outlook.

However, retail rentals will continued to be under pressure from new supply and a challenging retail environment.

"The group's hotels in Asia Pacific, particularly those in the People's Republic of China and Myanmar, continue to face competitive pressures and oversupply of room," it added.

The group revealed that it will redevelop Pan Pacific Orchard hotel into a new hotel with more rooms. The existing hotel will cease operations in the second quarter of 2018.

Next year, the group is targeting to launch a new condominium with about 750 units on the Raintree Gardens site in Potong Pasir as well as a condo of about 140 units at 45 Amber Road.

It expects to launch in 2019 a new project on the Nanak Mansions site along Meyer Road. Acquisition of the site is expected to be completed next month.This project is an equal joint venture with Kheng Leong.