UOL poised for greater growth with Marina Centre stake, says DBS

SINGAPORE (May 14): DBS Vickers Securities is maintaining its “buy” call on UOL Group with a target price of $8.53, which implies 0.8 times P/NAV and is pegged to a 35% discount to RNAV after taking into account the group’s higher valuation as well as stake in Marina Centre Holdings (MCH).

In a Monday report, analyst Rachel Tan says she believes UOL – which is trading at 0.6 times P/NAV at the 10 May closing price of $7.26 – could potentially trade closer to its NAV as the group unlocks value from its commercial and hospitality assets going forward.

This comes after UOL’s gaining of a 50% controlling stake in UIC to 50% and its recent purchase of a minority stake in MCH, which Tan believes positions UOL to gain from asset enhancement / redevelopment potential riding on the Singapore government’s plan to rejuvenate the central business district (CBD).

“[With a minority stake in MCH], UOL now has control over a prime integrated development comprising a retail mall and three hotels fronting the Marina Bay area,” notes Tan.

“According to the government incentive scheme, a residential component will have to be included in the redevelopment plans. Management sees this as a land banking opportunity in the medium-term. While management is positive of the opportunity to intensify the land site, management is mindful of potential costs involved including construction costs and development charges,” she adds.

As at 11:22am, shares in UOL are trading 0.99% lower at $7.01 or 0.58 times FY19F book value.