Brokers' take: CGS-CIMB maintains 'add' on UOL on 'solid execution', raises target price

CGS-CIMB has raised its target price for UOL to S$8, up from S$7.91. It reiterated its "add" call, positive on the group's "diversified business model with a high proportion of recurring income".

The research house is also positive on the group for its "solid execution".

CGS-CIMB analyst Lock Mun Yee highlighted in a Friday report that UOL is replenishing its development landbank. Together with its joint-venture partners, it successfully bid for a residential site in Ang Mo Kio for S$381.4 million, with a gross floor area of 415,415 square feet that can house more than 370 condominium units.

Another new launch of 448 units at a Canberra Drive residence is planned for the third quarter of this year and is expected to be well-received. "This will continue to extend the group's development income visibility," Ms Lock said.

Furthermore, ongoing projects also continue to see brisk sales.

Portfolio performance will be driven by active asset management, she said.

UOL's committed retail portfolio saw 94.9 per cent occupancy as at end-FY2020, but with food and beverage, education and leisure and entertainment tenants making up about 48 per cent of its retail portfolio lettable area, Singapore's ban on dining-in under Phase 2 (Heightened Alert) may pose a challenge.

"Despite the anticipated pressure on near-term rental reversions, we believe the group would continue to rejig its tenant mix to reposition and improve the malls' performance in the medium term," Ms Lock said.

She added that office committed occupancy remained high at 94.1 per cent as at end-FY2020 but hotel revenue declined significantly and is likely to continue to weigh due to prolonged international travel restrictions.

However, the analyst noted that planned enhancements to UOL's assets will drive medium-term asset productivity. Its subsidiary Singapore Land Group has secured S$100 million of green loans to update its "large, if a little dated" office properties with green features by end-2023.

It has also received in-principle approval to expand Odeon Towers with a new standalone seven-storey extension at 333 North Bridge Road. Shares of UOL closed at S$7.41, up S$0.04 or 0.54 per cent on Monday.