OUE Limited - Expanding into healthcare real estate
- FY16 results in line.
- Healthy sales at OUE Twin Peaks.
- Expanding into healthcare Real Estate.
FY16 results mostly within expectations
- OUE reported that its FY16 PATMI dipped 7.7% YoY to S$144.4m mainly due to lower share of results of equity-accounted investees and higher finance expenses, partially offset by reversal of impairment losses on OUE Twin Peaks.
- In terms of the topline, however, we saw a jump from S$431.5m to S$884.2 in FY16 mostly because of strong contributions from both the Property Investment and Property Development divisions.
- FY16 revenues from the Property Investment division increased 36.9% primarily due to the full year consolidation of One Raffles Place while the boost from the Property Development division was attributed to healthy sales at OUE Twin Peaks.
- OUE’s FY16 revenues also included contributions from the divestment of Crowne Plaza Changi Airport Extension to its hospitality REIT (OUE-HT) in Aug 2016.
- Accounting for onetime items, we judge this quarter’s numbers to be broadly in line with expectations. The group has proposed a final cash dividend of 2.0 S-cents per share, which brings the total cash dividend for FY16 to 5.0 S-cents per share.
Expanding into healthcare real estate with IHC offer
- Management reports that the asset enhancement at OUE Downtown is expected to be completed in 2Q17, with the office component of the project enjoying a fairly healthy occupancy rate of 86.9% despite ongoing enhancements works.
- In addition, as at end FY16, due to active marketing efforts, a total of 384 units (out of 462 units) at OUE Twin Peaks have been sold.
- The group’s balance sheet remains healthy with cash and equivalents of S$239.0m and a net gearing of 57.3%, and management continues to actively seek opportunistic acquisitions.
- OUE recently launched a mandatory unconditional cash offer for International Healthway Corporation Ltd (IHC) at S$0.106 per share. The group currently owns a 57.6% aggregate stake in IHC, which makes its offer unconditional, and management intends to expand into healthcare real estate which will be a strategic fit to its existing asset portfolio.
- Maintain BUY with an unchanged fair value estimate of S$2.17.