Rachel Tan and Derek Tan of DBS Group Research have kept their "buy" call and $8.40 target price on UOL Group, as they believe that strong sell-through of its residential projects could be a catalyst for the share price to move.
The 520-unit Pinetree Hill, the former Watten Estate Condominium, is the latest project by UOL this year, which is a joint venture with SingLand.
Strong presales for these projects will add to the almost $1.5 billion in presales locked in 2022, note the analysts in their July 4 note.
In addition, UOL's hospitality division is seen to capitalise on the pent-up travel demand this year, with the reopening of the Chinese market as the swing factor to drive RevPAR higher, fuelled by planned room expansion.
Their $8.40 target price is pegged to a 40% discount to our RNAV of $14.00. "We continue to see value in UOL at 0.5x P/B and 0.48x P/RNAV – trading below -1SD of the mean," the analysts say.
While ROE is expected to be in the 3%-4% range (ex fair value gains), share price catalysts will come from better-than-expected performance in its hospitality division or higher selling prices achieved for its new launches, the analysts note.
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Possible downsides include higher financing costs from higher rates.
And of course, the government is keeping its "hawkish" stance on the property market, any cooling measures could have an impact on its sell-through rates, the analysts add.
UOL as at 12.30 pm traded at $6.38, down from yesterday's close of $6.51. Year to date, UOL is down 4.78%.
