SINGAPORE (Nov 13): OCBC Investment Research and Maybank Kim Eng are maintaining their “buy” calls on property developer UOL Group with higher target prices of $9.70 and $9.85 respectively.
In a Monday note, OCBC says it has updated its valuation model to factor in UOL’s latest 3Q results, where earnings were up sevenfold to $618.1 million on higher revenue as a result of accounting for UIC as a subsidiary following the group’s acquisition of 60 million UIC shares in August this year.
See: UOL's 3Q earnings up sevenfold to $618.1 mil on higher revenue
“In addition to a turnaround in domestic home prices, management also expects office rents to stabilise ahead while the retail sector is expected to remain under pressure. In the hospitality sector in Asia Pacific, UOL also highlights competitive pressures and an oversupply of rooms, particularly in China and Myanmar,” notes the OCBC research team.
Maybank thinks of the group’s 3Q17 operating performance as “no surprise” due to various adjustments made for the consolidation of UIC. Nevertheless, it continues to like the stock as a key beneficiary of the impending rebound in Singapore’s property market.
The research house has therefore raised its RNAV estimates to $10.95 to incorporate its latest target price for UOB, which lifts its target price to $9.85 based on an unchanged RNAV discount of 10%.
“As highlighted previously, we believe buying UIC shares allows UOL to access the underlying real estate at a discount and is a less-risky avenue for value creation in times of escalating land prices,” says Maybank analyst Derrick Heng in a report last Friday.
“The “creep rule (<1% stake increase every six months to avoid general offer)”continues to apply until its stake clears the 50% mark,” he adds.
As at 12:45pm, shares in UOL are up by 5 cents at $8.80.
