Valued at “just” $1.05 billion or $490 per sq ft on a gross floor area (GFA) basis on the books, the analysts see that the “low holding costs” for the 2.15 million sq ft mall offers a “blank sheet of opportunities to extract value”.
“We envision two possible development schemes that could drive gross development values (GDVs) by 3.5 times - 4.5 times to $3.6 billion - $4.8 billion upon completion,” they write. This key value-unlocking activity is expected to drive the share prices of both groups higher, they add.
In September 2023, the Straits Times reported that SingLand sent in an application to the Urban Redevelopment Authority (URA) to rezone its Marina Square site. SingLand had subsequently obtained provisional permission from the authorities to partially redevelop Marina Square. At the time, the application involved rezoning a portion of the site from “hotel” to “residential with commercial at first storey”.
While there have been no further updates since then, Tan and Foo note that UOL’s and SingLand’s management teams have been in “constant discussions” with authorities on the proposed redevelopment. The teams also “remain hopeful of finalising the details in 2025”.
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In addition, the analysts see positive developments in URA’s extension of the central business district incentive (CBDI) and strategic development incentive (SDI) schemes for another five years till February 2030, to encourage rejuvenation and redevelopment in key strategic areas. The Ministry of National Development (MND) also announced, on March 5, that developers get an additional six to 12 months' extension to the additional buyer’s stamp duty (ABSD) deadline to sell out the units, depending on the scale and size of these redevelopments. This revised timeline applies to new land/projects going forward and is not retrospective, which is another plus for UOL and SingLand.
UOL ‘well on its way’ to extract value; SingLand ‘the best proxy’
To this end, the analysts see that UOL is “well on its way” to extract value at Marina Centre Holdings.
The way they see it, concerns surrounding the huge capital commitment are likely to be unfounded given the group’s “significant debt capacity” of up to $1.0 billion - $2.0 billion or a debt-equity of 0.4 times to 0.5 times.
“The planned sale of a residential component will partly monetise the project when launched. In our assumed scenarios, given UOL’s 62% effective stake (23% direct, and 50% stake in SingLand) in the development, we see an uplift of between 68 cents [per] share to $1.00 [per] share for the group,” write Tan and Foo. “Further monetisation (i.e., hotels, offices) remains a possibility for UOL to maintain its overall capital structure and drive value for shareholders.”
Meanwhile, the analysts see SingLand as the “best proxy” to benefit from the redevelopment of Marina Square Mall with its 77% stake and any impact will be “material and visible”.
“With a net debt/equity of close to 0.2 times, we see significant capacity for SingLand to participate in a redevelopment scheme. With our estimated 10% - 30% uplift in GFA from the redevelopment schemes, we estimate a revised net asset value (RNAV) uplift in the range of 52 cents to 77 cents [per] share (+8% - 12% rise in RNAV),” they write.
At current levels, SingLand is trading at around 0.35 times P/B or 0.30 times P/RNAV, the analysts add.
The analysts have kept their “buy” call on UOL with an unchanged target price of $8.40, while SingLand is not rated by the brokerage.
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Shares in UOL closed 9 cents lower or 1.61% down at $5.49 on April 11 while shares in SingLand closed 1 cent lower or 0.54% down at $1.86.
Graphics: DBS
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