Brokers' Call

UOL Group

Brokers: OCBC Investment Research

Call: Buy

Target Price: $7.30

The UOL group has sold 200 out of the 250 units launched for sale at its 505-unit condominium project, The Clement Canopy, at average selling prices of $1,300 to $1,400 per sq ft.

Given the muted domestic residential market, this is being viewed as a healthy launch performance and encouraging in terms of UOL's continued ability to create value through projects with good location and product attributes.

The group enjoys a relatively stable earnings profile in an uncertain operating environment; as of end-2016, about 82 per cent of UOL's operating profits are derived from recurring income sources, including property investments, hotel operations, investments and management services, with above 90 per cent occupancy rates achieved for almost all its commercial properties in Singapore.

In addition, current valuations of its share price are seen to be undemanding at 0.66 times price-to-book, particularly with its healthy balance sheet with 24 per cent gearing ratio and $301.5 million in cash.

Singapore Post

Brokers: OCBC Investment Research

Call: Hold

Target Price: $1.30

Singapore Post announced last week that Mr Marcelo Wesseler has resigned as chief executive officer of SP eCommerce, and will be assisting the company to ensure a smooth transition of duties during his period of notice till June 5.

Mr Paul Demirdjian has been appointed interim CEO of US businesses; he is currently the president and CEO of SingPost's US subsidiary, Jagged Peak.

SingPost also announced on March 3 that its e-commerce logistics provider, Quantium Solutions International, has entered into a share purchase agreement with Rantai Bumi Laut to acquire an additional 18 per cent stake in Quantium Solutions Logistics Indonesia.

SingPost is investing for the future, and time is required for the efforts to bear fruit. Meanwhile, the market will likely look forward to June 1, 2017, which is when the new CEO joins the group.

CapitaLand Commercial Trust

Brokers: DBS Group Research

Call: Buy

Target Price: $1.69

Despite the expected decline in the office market, the timely acquisition of the remaining 60 per cent in CapitaGreen helps to offset potential negative rental reversions and lower occupancies for the rest of CapitaLand Commercial Trust's (CCT) portfolio.

It will also allow CCT to deliver 2 per cent growth in distribution per unit this year (excluding the impact from the redevelopment of Golden Shoe Car Park and potential sale of Wilkie Edge).

The boost is already visible from the 10 per cent year-on-year increase in the fourth-quarter distribution per unit last year.

CCT's Singapore Grade A office portfolio trades at an implied value of approximately $2,000 per sq ft (psf), compared with recent sales of between $2,700 and $3,500 psf.

While CCT's Grade A portfolio is unlikely to trade higher to $2,700 given the older profile of some of its properties, the current strength of the physical market and 999-year leasehold status of some of its buildings warrant CCT to trade close to its book value of $1.73 per unit or an implied valuation of $2,100 psf. The next catalyst would be the sale of Wilkie Edge above book value.

A key risk is new office supply causing spot rents to fall below $7 psf, which is likely to lead to lower-than-expected asking rents and rental income.

A version of this article appeared in the print edition of The Straits Times on March 13, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe