SINGAPORE (Feb 27): Maybank Kim Eng Research continues to rate UOL Group Limited at “buy”, mainly for the property developer’s “strong execution with quick inventory turnover stemming from the right pricing strategy” following the release of its FY16 results, which was largely in line with estimates.
The research house has raised its target price on the stock to $7.68 from $7.39 previously after factoring in initial estimates for 45 Amber Road – as well as incorporating its latest $19.54 target price for UOB.
(See also: UOL full year earnings fall 27% to $287 mil on fair value, other losses)
It also recommends that investors switch to the stock from CapitaLand and City Developments Limited, which Maybank has rated at “hold” with target prices of $19.54 and $9 respectively.
“We believe UOL’s focus on mid-to-mass market projects has allowed it to move units faster than the competition with a high-end focus. By adopting the right pricing strategy, it has been able to achieve swift sales that drive quick inventory turnover. This lowers development risks and allows it to recycle capital quickly,” explains analyst Derek Heng in a Monday report.
Heng says he continues to like UOL for its defensive positioning – namely its strong recurring income stream of about $300 million a year, which he believes to provide a good cushion amidst a tough market environment.
Noting the group’s demonstration of strong execution in Singapore’s residential market, the analyst highlights that UOL currently also has no exposure to potential QC penalties in the near term, having sold its enbloc projects brought prior to the global financial crisis (GFC).
“We see deep value in the shares that suggest the market has not priced in upside from a medium-term restructuring story. By slowly accumulating UIC shares, UOL is effectively acquiring its underlying properties at half their value,” says Heng.
As at 11.50am, shares of UOL are trading 1.95% lower at $6.52.
