SINGAPORE (June 13): CGS-CIMB Research is reiterating its “add” call on developer UOL Group with an unchanged target price of $9.65, which is based on a 20% discount to RNAV.

This comes after paying a visit to UOL’s Amber 45 show flat, where CGS-CIMB noted improvement in take-up rates for the project to about 65% presently from 55-60% during the initial May 2018 launch of 139 units.

In a Tuesday report, analyst Lock Mun Yee underscores the group’s declining share price over recent weeks, in tandem with its property peers yet trading slightly above its long-term average discount trend at its current 34% discount to RNAV.

She also notes how the steady residential take-up momentum indicates continued buyer interest in the development, which is slated to complete in 2021.

“Following this success, UOL plans to release The Tre Ver (former Raintree Gardens enbloc site) in 3Q18. The 563,941sf GFA site can house about 729 condos. This land parcel was acquired in late-2016 at a lower-than-current land cost. We estimate a breakeven cost of c. $1,200psf,” comments the analyst.

Based on the estimated selling price of $1,400 psf for The Tre Ver, Lock thinks UOL should generate a healthy PBT margin of about 15%, which she believes will continue extending residential income visibility for the group.

Meanwhile, Lock thinks UOL’s continued acquisition of UIC shares in the open market is likely to expand the former’s exposure to the rising office lease market in Singapore, as well as build up its recurrent income base.

Including its 49.985% stake in UIC as at June 12, UOL now owns 5.6m sq ft of office and retail investment properties, which makes it one of the larger landlords in Singapore.  

“Given its strong balance sheet and net-debt-to-equity of 0.21 times, we think UOL can deploy more capital into new investments, which could catalyse its stock price. Downside risks to our call include slower-than-expected pace of sales for new launches,” concludes the analyst.

As at 11.21am, shares in UOL are trading 1 cent lower at $7.99 or 0.7 times FY18 book.