CIMB Research raised its target price on United Engineers Ltd to S$3.14 from S$2.78 and maintained its ‘outperform’ rating to factor in the company’s hospitality assets and business park values.
United shares were down 0.4 percent at S$2.48 on Monday. The stock has increased 32 percent so far this year versus the 25 percent gain in the FT ST Small Cap Index.
CIMB said United’s portfolio of investment assets has grown to S$1.7 billion ($1.4 billion). It added that it sees potential for redevelopment of the company’s building in Singapore, UE Square, and does not rule out asset divestments.
United’s balance sheet is likely to strengthen in 2014 - a good time for large developments or acquisitions - and the firm may give a potential dividend surprise, CIMB said. Its target price was pegged to a 35 percent discount to revised net asset value, it added.
However, CIMB flagged a weak 2012 fiscal year due to a change in accounting treatment, with United’s earnings backed purely by investment properties and construction segment.
Reporting by Eveline Danubrata in Singapore; Editing by Sunil Nair; email@example.com $1 = 1.2267 Singapore dollars