Citi Research analyst Brandon Lee is keeping his “buy” call on UOL Group (UOL) with an unchanged target price of $9.20 following the 50% take-up of its Meyer Blue asset at an average selling price of $3260 per sq ft on the first day of its private launch.
Meyer Blue is a freehold 226-unit mid-end condominium owned and developed by a 80%/20% joint venture (JV) between UOL and its 50.4%-owned Singapore Land Group U06 .
According to information from EdgeProp Singapore, Lee notes: “The 50% take-up for UOL’s Meyer Blue exceeded our expectations, which we attribute to exclusive location, freehold status and relative pent-up demand, though similar take-ups should not be replicated across the majority of upcoming projects given different attributes, in our view.”
Notably, the average selling price was above the highest end of the recently transacted price range of three projects nearby.
On this, Lee notes that if UOL can sustain similar pricing for the remaining unsold portion, a profit before tax margin of above 15% and a revised net asset value (RNAV) accretion of around 1% can be attained.
“With its next new launch (the 1,195-unit Parktown Residence) only in 1QFY2025, we expect UOL to market existing projects more proactively, specifically Pinetree Hill which still has 274 unsold units,” writes Lee.
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The analyst understands that UOL and City Developments (CDL) are the most direct proxies to the Singapore property sector, in view of their respective 86% and 52% exposure.
He expects UOL to benefit from a decent take-up for two of its residential launches in 2HFY2024, and expectations of more redevelopments of its aged commercial properties.
Key downside risks noted by Lee include capital rate expansion as interest rates rise, a sharp economic slowdown resulting in weaker-than-expected office and retail net absorption, a fall in tourist arrivals and corporate demand resulting in revenue per available room (RevPAR) declines and lastly, a prolonged period of existing cooling measures.
As at 11.58 am, shares in UOL Group are trading 2 cents lower or 0.36% down at $5.57.
