SINGAPORE (July 9): OCBC is maintaining its “buy” call on UOL Group with a lowered fair value estimate of $8.48.
This follows the Singapore government’s latest cooling measures on the residential property market.
See: Singapore raises ABSD, tightens LTV after strong property price gains
Announced on July 5, the cooling measures include an increase in Additional Buyer’s Stamp Duty (ABSD) rates (except for Singapore Citizens and PRs making their first residential purchase) and tightening the Loan-to-Value (LTV) limits for all housing loans granted by financial institutions.
In a Monday report, analyst Andy Wong Teck Ching says, “This would likely result in softer demand for physical property from both locals and foreigners, coupled with greater caution on future land bids and collective sales by developers.”
Hence, the group will be negatively impacted by these measures, as the analyst estimates that it has a pipeline of about 2,050 units to be launched in Singapore over the next 12-18 months.
Before the tightening policies, the analyst forecasted that the group’s Singapore residential projects (including UIC) formed about 15% of the gross asset values (GAV) forecast.
Wong will be paying close attending to the group’s The Tre Ver project, which is expected to be launched this quarter.
See: Launch of Amber45 and The Tre Ver to give UOL a boost
Overall, these cooling measure are likely to impact the group’s residential sales prospects ahead, and thus the analyst's assumptions has been rejigged to incorporate a more challenging environment and negative sentiment surrounding the local residential sector.
“We factor in lower ASP assumptions and slower sales momentum, while also increasing our discount rate for UOL’s Singapore residential projects and widening our RNAV discount from 20% to 35%,” adds Wong.
Meanwhile, the group’s shares dropped 13.6% to almost $6.70 on Jul 6, a day after the new cooling measures were announced.
“We believe UOL’s shares have been oversold at current price level. UOL also has significant exposure to the office and hospitality sectors, which we believe are still undergoing a rental upcycle and RevPAR recovery, respectively, and also not affected by this round of cooling measures,” says Wong.
As at 10.35am, shares in UOL are trading 16 cents higher at $6.86.
