‘Unnoticed’ UEM to benefit from Singapore office recovery: CGS-CIMB

Shares of United Engineers have been “overlooked,” but the company is set to benefit as Singapore’s office market recovery spreads, CGS-CIMB said in a note last week.

“UEM has gone unnoticed in the current office rental upcycle as the market was focused on the core Central Business District (CDB) recovery,” the note said. “As the office market upcycle broadens, amid tight CDB supply, we believe UEM’s assets such as UE Square and UE Bizhub Tower could benefit from rising rents, thus lifting property performance and operating margins and accrete to asset value.”

UEM has strong asset backing, with a “sizeable” around S$1.9 billion portfolio of wholly owned rental and hospitality properties, around half of which are office assets, the note said, adding that other businesses include property development, engineering, distribution and manufacturing activities.

“Re-rating catalysts could emerge from realising low-hanging fruits from any asset enhancements at its properties,” the note said.

Among potential moves to enhance assets, UEM could update the size of its serviced apartment units, which are larger than at newer properties and could be reconfigured into additional and smaller unites, the note said.

CGS-CIMB kept an Add call on the stock, but trimmed the target price to S$2.94 from S$3.03 on lower projected development profits.

The stock ended Monday up 0.38 percent at S$2.62.