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UOL Group gets TP raises on asset enhancement opportunities: analysts

Felicia Tan
Felicia Tan3/5/2021 03:31 PM GMT+08  • 3 min read
UOL Group gets TP raises on asset enhancement opportunities: analysts
As at 3.29pm, shares in UOL are trading 6 cents lower or 0.8% down at $7.40.
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Analysts from CGS-CIMB Research and OCBC Investment Research have maintained “buy” on UOL Limited with higher target prices on the group’s diversified portfolio, healthy balance sheet, as well as its ability to embark on redevelopment projects and asset enhancement initiatives (AEIs).

The group, on Feb 26, reported earnings of $13.1 million for the FY2020 ended December, representing a 97% plunge y-o-y. Core earnings per share (EPS) for the 2HFY2020 and FY2020 of 18.5 and 30.8 cents came in line with CGS-CIMB analyst Lock Mun Yee’s forecasts, while FY2020 core PATMI, which fell 17.2% y-o-y to $259.8 million, stood above the OCBC research team’s estimates for the period.

Lock has increased her target price estimate to $7.91 from $7.60 previously as she pegs a higher target price estimate for UOB, which has a controlling interest in the company.

SEE:Analysts remain positive on UOL Group despite $82.1mil loss in 1H20

She has also upped her earnings per share (EPS) estimates for the FY2021 to FY2022 by 0.182% and 0.386% respectively post-results.

“Our current estimates have not factored in value creation from its asset enhancement activities,” she writes.

“We continue to like UOL for its diversified business model with a high proportion of recurring income.”

On the continued buying demand for UOL’s residential projects, Lock foresees the group’s property development revenue, as well as its plans to roll out its 448-unit Canberra Drive project in 2QFY2021, to “underpin the group’s residential earnings visibility”.

For OCBC’s research team, it is positive on the group’s strong balance sheet, which could buttress its redevelopment projects.

UOL has obtained in-principle approval from the authorities to build a seven-storey building as an extension to its Odeon Towers Building. The new building will comprise office and retail space.

In addition, the group has obtained in-principle approval under the Strategic Development Initiative Scheme to redevelop its Faber House property into a 250-key hotel.

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“Besides potentially higher GFA to be unlocked from both projects, UOL will also be able to benefit from a decline in development charge rates in the Hotel and Commercial categories over the past year,” it says.

The team at OCBC has, similarly, upped its fair value estimate to $8.91 from $8.48, “still pegged to a 30% discount to its revalued net asset value (NRAV) estimate.”

As at 3.29pm, shares in UOL are trading 6 cents lower or 0.8% down at $7.40.

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