Deep value play
Trading at 0.7x P/Bk NAV and 0.6x P/RNAV, UOL Group (UOL) is an attractive deep value play, supported by a portfolio of quality commercial properties and hotels, serviced residences which are located near or within the Central Business District (CBD) of Singapore.
Commercial portfolio to remain resilient
UOL derives a significant 47%-58% of revenues from its retail, office and hotel segments which should continue delivering stable cashflows. We expect its portfolio of commercial properties (office & retail) to be resilient in the face of incoming headwinds for both the office and retail sectors. For offices, this is mainly due to their location along the fringes of the CBD where rental volatility is lesser, while its retail assets have a unique niche in the children and education sectors which has relatively inelastic tenant demand.
Deep value from its hotel business
We believe that Deep value from its hotel business. deep value lies in the group’s portfolio of well located hotels and serviced residences in Singapore, Malaysia and Australia. These hotels are held on a historical cost basis, which we believe to be conservative compared to potential market realizable value. We estimate potential upside of more than S$1bn if these properties’ valuations are marked-to-market.
Our revalued NAV (RNAV) of UOL is S$11.29, of which the main bulk of the upside came from its hotel properties. Our TP of S$8.47 is pegged to a 25% discount to RNAV. BUY!
Key Risks to Our View:
Economic slowdown. The downside risk to our projections is if residential sales are slower than our projections or if commercial properties and hotels operations are impacted by slower-than-projected growth in rental/room rates. (Read Report)
Source : DBS Group Research