SINGAPORE (Apr 27): Maybank is maintaining UOL at “buy” after a consortium led by the group emerged as the sole bidder for a city fringe site at a government land tender.
With the latest deal, the developer has effectively doubled its saleable resource that could yield 1,125 housing units, says Maybank. The $1.035 billion price tag translates into a reasonable land rate of $1,138 psf ppr, based on a maximum GFA of 84,551 sqm.
The price paid is significantly lower than $1,515 psf that CapitaLand paid for the redevelopment site at Pearl Bank Apartments.
“Assuming a LTV of 60%, we estimate only a 0.07 ppt increase in leverage to 0.28 times, on stronger sales and impending completion of projects under development would improve its cash collections in the year ahead, which leaves capacity for more deals,” says analyst Derrick Heng in a Friday report.
“Based on its effective stake of 65% in this project, we estimate a development surplus of 21 cents per share,” says Heng, “We keep estimates unchanged for now pending full model update.”
UOL will take a 50% stake in this project, while its 49.8%-owned associate UIC and Kheng Leong will take 30% and 20% stakes, respectively. Based on its effective stake of 65% in this project, Heng estimates a development surplus of 21 cents per share.
CIMB estimates UOL and UIC currently have a combined unsold inventory of about 1,100 units across seven projects. This deal effectively doubles its saleable resource by adding up to 1,125 units.
“Assuming an ASP of $2,200 psf, we estimate a potential GDV of $1.9 billion,” says Heng.
Balance sheet can easily fund this deal UOL has a healthy balance sheet with a low net gearing of just 0.21 times. Assuming a LTV of 60%, we estimate only a 0.07ppt increase in leverage to 0.28 times.
Maintain “buy” and $10.40 target price, based on a 10% discount to RNAV of $11.55.
As at 3.24pm, shares in UOL are up 5 cents at $8.75 or 18.4 times FY18 earnings.
