Wednesday, June 20, 2012
UOL/MCT: UOL will be included in the FTSE EPRA/NAREIT Global Developed Index (and Pure Asia Index) from Monday, with an index weightage higher than CMA and Keppel Land. In the days following the announcement of its inclusion, the stock jumped 16.6%, and vol on Friday clocked in at their highest levels since March 2005. UBS expect that this index inclusion would bring increased institutional investor interest and recap the key investment thesis for UOL Group. To recap, house estimate 90% of UOL’s assets are in SG. 16% of its RNAV is in SG residential, but its asset-turn strategy has meant 75% of this has been pre-sold. Its directly-held investment properties are in fringe office (15% of RNAV) and fringe retail (12% of RNAV), which gives its assets a more defensive tenant profile. Gearing of 33% gives it sufficient financial strength to replenish its landbank. House maintains Buy and increases TP to $5.73 based on SOTP, with a 15% discount to RNAV and 10% discount to listed entities. Similarly, MCT will also be added to the index.