Limit on Loan Tenure May Moderate Residential Property Demand

RESIDENTIAL MARKET

Loan tenure curb may moderate housing demand, says UOL

UOL Group, which yesterday posted a 13 per cent year-on-year drop in third-quarter net profit to $87.8 million, said that the recent restrictions to the tenure of housing loans could moderate housing demand in Singapore. This, combined with more supply coming on-stream, means any rise in private home prices is expected to be moderate.

"The residential market is still driven by high liquidity and low interest rates...Competition for acquisition of new (residential) sites is expected to remain intense," it added

On the Singapore office sector, it warned that the slowing rate of economic growth and new supply could put pressure on rents. However, retail rents are expected to remain stable, it added. UOL - which owns 82 per cent of Pan Pacific Hotels Group - also noted that while the outlook for hotels in Singapore remains positive with the addition of new attractions, global economic uncertainties could impact demand for hotel accommodation in the Asia-Pacific.

UOL's lower Q3 group net profit was largely because of a decline in income from property development and a 31 per cent y-on-y drop in share of profit from associated companies arising from a smaller contribution from Marina Centre Holdings (MCH) and United Industrial Corporation (UIC) - which in turn stemmed from the closure of Pan Pacific Singapore hotel for major renovations from April to September 2012.

The hotel is owned by MCH, which in turn is 23 per cent owned by UOL and 57 per cent owned by UIC's subsidiary Singapore Land.

UOL owns slightly over 43 per cent of UIC.

UOL's revenue decreased 33 per cent y-on-y to $277.7 million for the third quarter ended Sept 30, 2012. This was primarily due to lower revenues from sale of development properties following the completion of some of the group's development projects last year and this year ( such as Duchess Residences and Meadows@Peirce), as well as a drop in revenue from hotel management services. The latter was largely because of the closure of the Pan Pac Singapore.

Next year, UOL is expected to launch a five-storey freehold condo on the former St Patrick's Garden site and a 22-storey condo on a 99-year site in Bright Hill Drive. The latter is a tie-up with SingLand.

UOL's earnings per share (EPS) fell from 13.07 cents in Q3 2011 to 11.43 cents in Q3 2012. Net asset value (NAV) per share rose from $6.88 (restated) at Dec 31, 2011 to $7.35 at end-Sept. The counter ended 10 cents lower yesterday at $5.59.

In the first nine months of 2012, net profit fell 37 per cent y-on-y to $343.5 million - on the back of lower income from property development and associated companies, and lower fair-value gains on investment properties.

Pan Pacific Hotels Group posted a 41 per cent y-on-y drop in net profit to $6.5 million for Q3 2012. Revenue dipped 2 per cent to $89.5 million.

The group operates the namesake Singapore hotel in Marina Centre and owns Parkroyal hotels in Beach Road, Kitchener Road and a soon-to-open hotel on Upper Pickering Street.

The weaker topline was due mainly to lower revenue from hotel management services (due to Pan Pac Singapore's closure) and property investments (because of cessation of rental from Furniture Mall on Beach Road since end-April 2012).

Parkroyal on Pickering, a 363-room hotel, is slated for soft opening by year-end. The adjacent One Upper Pickering office tower, which is fully leased to Attorney-General's Chambers, obtained Temporary Occupation Permit last month. On Beach Road, the 180-unit Pan Pacific Serviced Suites is slated to open by end-Q1 2013.

Pan Pacific Hotels' EPS fell from 1.85 cents in Q3 2011 to 1.09 cents in Q3 2012. NAV per share was $1.49 at Sept 30, 2012, up one cent from the restated figure for end-Dec 2011. In the first nine months, net profit rose 43 per cent to $41.5 million, on the back of a 6 per cent hike in revenue to $274.4 million. The counter closed 1 cent lower at $2.21 yesterday.

Source: Business Times – 9 November 2012