Proposed rezoning of Marina Square could have 'significant upsides' to NAVs, says DBS

SingLand is currently trading at a P/B of 0.4x while UOL Group is trading at a P/B of 0.5x.

The proposed rezoning of Marina Square by Singapore Land Group (SingLand) U06 and UOL Group U14 has come as a “positive surprise”, says the team at DBS Group Research.

SingLand, a listed subsidiary of UOL, had submitted an application to the Urban Redevelopment Authority (URA) to rezone its Marina Square site.

The site, which is currently zoned for hotel use, has been proposed for rezoning to residential use “with commercial at first storey”. The application also asked for the gross plot ratio of two plots occupied by the mixed-use development along Raffles Boulevard to be removed.

To the team at DBS, SingLand and UOL Group will be “extracting gold” from within their portfolio should the redevelopment of their Marina Square site go ahead. The team is expecting to see “significant upsides” to the net asset values (NAVs) of both SingLand and UOL Group although the overall costs to redevelopment and hefty land betterment charges (LBC) may be a near-term overhang.

“This application involves intensification of the 99-year leasehold site and if approved, should involve a possible residential tower and a rejuvenation of the ageing mall, which in our view, faces competition from nearby Suntec City and Millenia Walk, which underwent a round of asset repositioning in the past two years,” the team writes.

“While details are scant for now, key questions arising will be the cost of the overall development which could weigh on returns and potential LBC that could be levied on the entire plot (with gross floor area or GFA [being over] 3 million sq ft) which could be hefty,” they add. “That said, the rejuvenation coupled with upside to GFA, capital values [are] an incremental positive for both SingLand and UOL.”

SingLand, which is not rated by DBS, is currently trading at a P/B of 0.4x based on its last-closed share price of $2.01. DBS has rated UOL “buy” with a target price of $8.40. At UOL’s last-closed share price of $6.66 on Sept 15, the stock is trading at a “steep” P/B of 0.5x.

As at 3.14pm, shares in SingLand are trading 4 cents higher or 1.99% up at $2.05 while shares in UOL are trading 9 cents lower or 1.35% down at $6.57.

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