SINGAPORE (Aug 25): UOB Kay Hian is maintaining its “buy” call on GuocoLand with a target price of $2.80 as the group is a key beneficiary of property sector turnaround and rotational interest.
The group is well positioned to ride the property uptrend as it derives 70% of its value from the Singapore market.
It is also a beneficiary of the expected privatisation of Global Logistic Properties, which has resulted in strong interest from fund managers of property developers who are looking to replace the gap in their portfolios.
Well ahead of its upcoming full-year results, GuocoLand’s share price has surged 9.1% week-on-week, outperforming its peers and the broader market.
Although this pickup brings the group’s 26% increase in ytd share price performance in line with its peers, it still lags significantly behind City Developments that reported a 38.8% increase.
In a Friday report, analyst Vikrant Pandey says, “Earnings are expected to receive a strong boost from the development properties with the pickup in residential sales momentum in Singapore and China.”
In Singapore, the key contributors will be Urban Oasis and Leedon Residence, boosted by the potential revaluation gains in the Tanjong Pagar Centre.
Therefore, the analyst predicts bumper earnings growth, excluding the divestment of Beijing Dongzhimen project that resulted in a one-off gain last year.
The group has addressed both of its major overhangs – dispute surrounding its ownership of its Beijing Dongzhimen (DZM) project and its relative high gearing compared with its peers.
“This paves the way for a continued re-rating of the stock,” says Pandey.
During the last financial year, the group sold the DZM project to China Cinda Asset Management for a consideration of RMB10.5 billion ($2.15 billion), generating a net gain of RMB1.58 billion.
Shares in GuocoLand are trading at $2.28 as at 4.05pm.
The stock is trading at 15.8 times FY17F earnings with a dividend yield of 2.2%.
