UOL GROUP LIMITED
U14.SI
UOL Group - Deep Value Within
Deep value play.
- Trading at 0.7x P/Bk NAV and 0.6x P/RNAV, UOL Group (UOL) is an attractive deep value play, supported by a portfolio of quality commercial properties and hotels, serviced residences which are located near or within the Central Business District (CBD) of Singapore.
Commercial portfolio to remain resilient.
- UOL derives a significant 47%-58% of revenues from its retail, office and hotel segments which should continue delivering stable cashflows. We expect its portfolio of commercial properties (office & retail) to be resilient in the face of incoming headwinds for both the office and retail sectors.
- For offices, this is mainly due to their location along the fringes of the CBD where rental volatility is lesser, while its retail assets have a unique niche in the children and education sectors which has relatively inelastic tenant demand.
Deep value from its hotel business.
- We believe that deep value lies in the group’s portfolio of well located hotels and serviced residences in Singapore, Malaysia and Australia. These hotels are held on a historical cost basis, which we believe to be conservative compared to potential market realizable value.
- We estimate potential upside of more than S$1bn if these properties’ valuations are marked-to-market.
Valuation:
- Our revalued NAV (RNAV) of UOL is S$11.29, of which the main bulk of the upside came from its hotel properties.
- Our TP of S$8.47 is pegged to a 25% discount to RNAV. BUY!
Key Risks to Our View:
Economic slowdown.
- The downside risk to our projections is if residential sales are slower than our projections or if commercial properties and hotels operations are impacted by slower-than-projected growth in rental/room rates.
Derek Tan
DBS Vickers
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Mervin Song
DBS Vickers
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Rachael TAN
DBS Vickers
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http://www.dbsvickers.com/
2015-11-02
DBS Vickers
SGX Stock
Analyst Report
8.47
BUY
8.47
