UOL GROUP LIMITED
SGX:U14
UOL Group Ltd - Oversold
Maintain BUY; Target Price SGD8.95
- We cut Target Price to SGD8.95, based on a revised RNAV discount of 25% (from 10%).
- Our RNAV estimate is lowered by 1.2% to SGD11.91 after downgrading our ASP assumptions. Our FY18-20E EPS is cut by up to 9%.
- With the stock trading at over 40% discount to its RNAV, we believe the knee jerk reaction to policy tightening may have over-compensated for headwinds to its residential projects.
- Maintain BUY. UOL remains as our top pick amongst Singapore developers.
Cutting ASP assumptions
- With a 5-10% increase in ABSD for property investors, we expect developers to lower ASPs to stimulate demand.
- We cut ASP for The Tre Ver (former Raintree Gardens) by 5% to SGD1,560 psf. As the site was acquired prior to land price escalation in the vicinity, we continue to see double digit margin for this project.
- We cut our assumptions for Silat Avenue site by 7% to SGD2,050 psf. Nanak Mansion, a high-end project in the East Coast is cut by 13%.
Cheaper proxy to office recovery
- Including its pro-rata stake in UIC, UOL offers a 29% aggregate exposure (by value) to Singapore’s office market. At 0.6x P/BV and 42% discount to its RNAV, we believe UOL is a much cheaper proxy to a recovering office market than office REITs which are trading close to book values.
- Furthermore, with the company recently gaining statutory control of UIC, repositioning and redevelopment potential within its commercial portfolio remains an attractive medium term theme.
Sector Report:
Other Property Developer Stocks:
Bukit Sembawang - Most Exposed To Singapore’s Residential Market
Ho Bee Land (HOBEE) - Diversification Pays Off
City Developments - Policy Overhang
Oxley Holdings - Highly Exposed To Residential Headwinds
CapitaLand - Small Exposure To SG Residential
GuocoLand - Limited Upside
Derrick Heng CFA
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2018-07-06
SGX Stock
Analyst Report
8.95
Down
10.850
