OCBC Investment Research has kept “buy” on UOL Group with a higher fair value estimate of $9.27 from $8.91.
The higher fair value estimate comes with an environmental social and governance (ESG) valuation premium, as UOL has displayed “consistent solid ESG performance”.
So far, the group has demonstrated a “comprehensive” health and safety management system as well as energy and water efficiency programmes. The group falls into the average scoring range in the corporate governance category, compared to its global peers, notes the team.
The positive sentiment also comes as the property group’s 1HFY2021 results missed the team’s expectations as core PATMI of $91.3 million stood at 31.9% of its initial FY2021 estimates.
That said, UOL is looking at a portfolio rejuvenation as management provided updates on its major asset enhancement initiatives (AEIs) and redevelopment projects like Singapore Land Tower and Faber House.
UOL has managed to obtain approval from the Urban Redevelopment Authority (URA) for Faber House for a “significant uplift” in gross floor area (GFA) for its redevelopment.
The group is also exploring other potential redevelopment opportunities, mostly for its older buildings like the Singapore Land Tower.
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One of the main issues identified by the OCBC team, however, is construction costs, which have increased during Covid-19.
As at 3.19pm, shares in UOL are trading 14 cents lower or 1.93% down at $7.10, or an FY2021 P/NAV of 0.6 times and dividend yield of 2.4%, according to OCBC’s estimates.
Photo: UOL
