SINGAPORE (Feb 28): CIMB is reiterating its “add” recommendation on UOL Group with a target price of $9.67, which is based on a 20% discount to a higher RNAV of $12.09 after adjusting FY81-19 EPS estimates post the property developer’s 4Q results.

See: UOL reports trebling of FY17 earnings to $891 mil on UIC consolidation

In a Tuesday report, CIMB analyst Lock Mun Yee says she expects office rental contributions to remain relatively stable going forward with the recovery in the office leasing market – while residential sales should continue to track higher, which should provide residential earnings visibility especially when the group’s two new projects are launched in FY18.

“Balance sheet is healthy with a 0.21 times net debt to equity ratio which could provide upside catalysts if it taps into accretive new investment opportunities. Downside risks include a slower-than-expected pace of residential launches and office market recovery,” says Lock.

Likewise, Maybank has maintained its “buy” call on UOL with a higher target price of $10.40, based on an unchanged RNAV discount of 10% with higher RNAV estimates of $11.55 from $10.95 previously after incorporating the latest data points and rolling forward the valuation basis to 2018E.

This comes on expectations of significant revenue pick-up in the year ahead, especially with the impending completion of Park Eleven and the launch of its second phase, which it believes will drive strong recognition.

“In particular, UIC is very lightly geared with just $0.5 billion of debt against a $8.3 billion asset base. This debt headroom could come in handy when pursuing redevelopment and repositioning opportunities in the future,” notes Maybank analyst Derrick Heng in a report on Wednesday.

OCBC also continues to like the stock for its healthy balance sheet, its strong exposure to the Singapore residential property market and an earnings beat which has prompted the research house to raise its fair value estimate to $10.63 from $9.70 previously.

OCBC expects prices to rise, describing Singapore's residential property market as still in a "nascent stage of recovery."

As at 2.51pm, shares in UOL are trading 7 cents lower at $8.45 or 0.73 times FY18F book according to CIMB estimates.