Analysts from DBS Group Research and Citi Research are remaining positive on UOL Group after the group announced its earnings for the FY2023 ended Dec 31, 2023, on Feb 27.
For the year, the group reported earnings of $707.7 million, 44% higher y-o-y, due partly to the one-off gain from the sale of Parkroyal on Kitchener Road.
DBS Group Research analysts Derek Tan, Tabitha Foo and Rachel Tan have kept their “buy” call as they note UOL’s “blockbuster end” to a rough year. The team also notes the group’s improved operating metrics, adding that the additional $1.1 billion in residential sales provided “earnings visibility”.
Among the positives, including a decline in debt ratio and strong short-term liquidity, the team notes the group’s weaker financial metrics due to its higher debt obligations. However, they see that the ebitda interest coverage ratio (ICR) will see “some improvement” in FY2024 on the back of a peak in interest rates.
In FY2023, UOL declared a total dividend of 20 cents – comprising a first and final dividend of 15 cents and a special dividend of 5 cents.
“We believe the group’s dividend surprise in FY2023 will be well-liked by investors, as will its stable increase in net asset value to $13.07 per share (+3.8% y-o-y),” says the team.
“We see deep value at close to 0.46 times P/BV (versus the five-year historical average of 0.55 times) as attractive,” they add.
Furthermore, the coming year looks to be an exciting one for the group with continued recovery in hotel operation, strong sales for its upcoming launches and improved contributions from Investment Properties from the completion of its asset enhancement at Odeon 333 and Singapore Land Tower.
The analysts’ target price remains unchanged at $8.40, which is pegged to a 40% discount to revalued net asset value (RNAV) of $14.
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Citi Research analyst Brandon Lee has also kept his “buy” call on UOL on valuations. He also likes that the group looks to be “well-positioned” to acquire and pay dividends.
While the group’s 2HFY2023 earnings missed Lee’s expectations, the surprise dividend payout made up for it.
“We see slight positive share price impact on higher-than-expected dividend per share (DPS), mitigated by earnings miss,” he writes.
The dividend also highlighted the importance of asset monetisation, which the group did with the successful sale of Parkroyal on Kitchener Road at a gain of $0.4 billion or a premium of 24%.
“While UOL will continue to look across its office and hospitality portfolio for divestment opportunities (with proceeds for dividends), we think the pace will be gradual given low net gearing of 24%. However, this allows UOL to replenish its residential landbank across all segments (despite inventory cycle of 3.2 years) and/or acquire overseas assets (likely offices in existing geographies of UK/Australia),” says Lee.
As at 3.54pm, shares in UOL are trading 14 cents higher or 2.33% up at $6.15.
