SINGAPORE (Nov 15): OCBC Investment Research and CGS-CIMB Securities are maintaining their “buy” and “add” calls on UOL Group with a fair value and price target of $8.41 and $8.45, respectively, post the release of the group’s 3Q18 financial results.
While UOL Group had reported a significant decline in 3Q earnings in the absence of a one-off gain from the consolidation of United Industrial Corporation (UIC) group in 2017, this came in line with both research houses’ expectations.
In a Wednesday report, OCBC analyst Andy Wong highlights UOL’s robust office portfolio, which saw healthy leasing momentum and occupancy rates. He also notes that the group is seeking to grow its recurring income streams, including in Australia, given the residential headwinds in Singapore.
While UOL anticipates being affected by recent property cooling measures in Singapore, Wong believes there is still time for the group to strengthen its property development segment and investment properties portfolio, given that there is still three years until the additional buyer stamp duty (ABSD) penalties kick in.
“UOL plans to launch both its freehold 92-128 Meyer Road (56 units) and Silat Avenue sites (1,074 units) in 2Q19. The recent announcement by the government on reshaping Sentosa and development plans for Pulau Brani to integrate them with the upcoming Greater Southern Waterfront project is a positive for UOL’s Silat Avenue project, in our view,” says Wong.
CGS-CIMB analyst Lock Mun Yee continues to like the stock for its strong balance sheet with a net debt to equity ratio of 0.82 times. She believes this places UOL in a good position to continue building on its recurring income sources.
She is also positive on the group’s recent residential launches including The Clement Canopy and Amber45, which she expects to drive profits, along with that of The Tre Ver, in the immediate term.
The group is currently in talks to possibly acquire an office building in Sydney, which Lock says is in line with the group’s strategy to grow its recurring income base, should the deal materialise.
“Share price catalyst could materialise when more capital is deployed into new, accretive investments, while downside risks include slower-than-expected take up for its new launches,” concludes Lock.
As at 1:20pm, shares in UOL Group are trading flat at $6.12 or 0.53 times Dec-18F book.
