OCBC Investment Research (OIR) analysts are keeping “buy” on UOL Group U14 with a fair value estimate of $8.26, highlighting the company's resilient Singapore residential portfolio notwithstanding the pandemic as well as several rounds of property cooling measures by the Singapore government.
The analysts note that UOL has been active on capital recycling activities over the past few months. Its proposal of the en bloc purchase of the freehold Meyer Park Condominium for $392.2 million is progressing, as the Strata Titles Board has issued an order of sale on July 30. This paves the way for the deal to be completed, the analysts add.
UOL had also announced on July 11 that it had been awarded a 99-year integrated residential and commercial site at Tampines Avenue 11 at a tender price of $1.2 billion. This is part of a 50:50 joint venture (JV) with CapitaLand Singapore Ltd.
On the divestment front, UOL entered into a sale and purchase agreement for the disposal of its entire stake in its 542-room PARKROYAL on Kitchener Road hotel for a consideration of $525 million. This is 24.1% above the freehold property’s valuation as at December.
The company believes this would be a good opportunity to unlock the value of its investment at an attractive price, given expected divestment gains of $446.2 million. Post-divestment, the pro forma accretion to UOL’s FY2022 net tangible assets (NTA) per share would be 4.2%, the analysts point out.
For 2023, the analysts forecast private residential price growth of up to 3%, while private new home sales would range between 6,000 to 6,800. UOL’s recent Pinetree Hills project launched in mid-July sold only 149 units as at July 30, or 29% of the total 520 units in the project at an average selling price of $2,367 per sq ft, based on data extracted from URA REALIS.
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“Better fortunes likely exist for UOL’s hotel operations in the near term, especially in Singapore, where industry revenue per available room (RevPAR) growth has been robust. 1HFY2023 RevPAR jumped 50.5% y-o-y to $213.6, although we note that monthly y-o-y growth has been moderating, partly due to low base effects wearing off,” the analysts add.
OIR expects UOL’s financial position to remain healthy, as it has been able to balance its investments with divestments. In terms of valuation, UOL is trading at consensus 12-month forward P/B multiple of 0.53x, which is 1.1 standard deviations below its 10-year average of 0.62x.
Based on OIR’s revalued net asset value estimate of $14.37, UOL’s discount stood at 51.6%, which the analysts believe reflects risks of additional property tightening measures by the Singapore government should home prices continue to run ahead of economic fundamentals.
As at 3.25pm, shares in UOL are trading 2 cents up or 0.28% higher at $7.05.
