• UOL is replenishing its Singapore residential launch pipeline to 818 units.
• Active asset management should drive commercial portfolio performance.
• We reiterate our ADD rating with a higher target price of S$8.00.

Replenishing Singapore Development Landbank

• UOL Group (SGX:U14) and its JV partners, Singapore Land Group (SGX:U06) and Kheng Leong, successfully bidded for a residential site in Ang Mo Kio Ave 1 (AMK) for S$381.4m. The site can house more than 370 condominiums spread over the 415,415 sq ft of gross floor area. Based on a land price of S$1,118 psf of floor area, we estimate the breakeven cost could be ~S$1,600- 1,650 psf.
• Meanwhile, sales at its ongoing projects continue to be brisk, with 159 units sold year-to-date Jun 21, based on URA data on 4 Jun 2021. Clavon is 83% sold and Avenue South Residences is 66.4% taken up.
• In terms of new launches, the 448-unit The WaterGardens at Canberra Drive is on track to be rolled out in early 3Q21. Given the present robust residential market, we expect this launch to be well-received when marketed. This will continue to extend UOL’s development income visibility.

Asset Enhancements to Drive Medium Term Asset Productivity

• As a major commercial property landlord in Singapore, UOL and its subsidiary Singapore Land Group, have embarked on active asset enhancement initiative for operational efficiency.
• UOL has also received in-principle approval from the authorities to expand the 333 North Bridge Rd site with a new standalone 7-storey extension. When completed, the new property would further expand the existing Odeon Towers’ footprint.

Active Portfolio Management to Improve Operational Performance

• Despite the high committed retail portfolio occupancy of 94.9% at end-FY20, we believe performance of UOL’s retail properties would likely be challenged as Singapore entered into heightened believe performance of its hospitality portfolio is likely to continue to drag in the near term with continued international travel restrictions.

Reiterate ADD With a Higher Target Price of S$8.00

• We lift our FY21-23F earnings per share estimates for UOL by 5.5-37.2% to bake in a faster discount to RNAV.
• We continue to like UOL for its diversified business model with a high proportion of recurring income.

• Re-rating catalyst: from a faster-than-projected recovery of its hotel operations.
• Downside risk: slower-than-expected pace of residential sales or new property cooling measures.

Source: CGS-CIMB Research - 4 Jun 2021