OUE Limited - OCBC Investment 2016-11-03: Strong execution, strong results

OUE Limited - OCBC Investment 2016-11-03: Strong execution, strong results OUE LIMITED LJ3.SI

OUE Limited - Strong execution, strong results

  • 3Q results broadly in line.
  • Boost from Crowne Plaza Changi Airport Extension (CPEX)  sale to OUEHT.
  • Focused on OUE Downtown AEI.

Significant earnings boost from CPEX divestment 

  • OUE reported 3Q16 PATMI of S$107.6m, up significantly YoY from S$15.0m in 3Q15, mainly due to divestment gains from the sale of the Crowne Plaza Changi Airport Extension (CPEX) to OUE H-REIT in Aug 2016, firmer sales at OUE Twin Peaks and also stronger numbers from the Property Investments Division. 
  • The results were also boosted by other one-time gains over the quarter, which includes the reversal of impairment losses of S$15.1m from units sold at OUE Twin Peaks. 
  • In terms of the topline, group revenues also rose YoY from S$99.0m in 3Q15 to S$419.1m in 3Q16 primarily because of the CPEX divestment, higher contributions from property development and property investments.
  • In particular, revenues from property investments increased YoY by S$21.9m to S$65.6m in 3Q16 due to the consolidation of revenues from One Raffles Place after the acquisition of additional interests in OUBC in Oct 2015. 
  • Accounting for one-time items, we judge this quarter’s numbers to be in line with expectations.

Serviced residences at OUE Downtown to open by mid-2017 

  • After active marketing effort and the implementation of a deferred payment scheme, the group has enjoyed significant success at selling units at OUE Twin Peaks, which by now has over 268 units sold (out of 462 total units) as at end Sep 2016. 
  • Looking ahead, management reports that it remains focused on asset enhancement works at OUE Downtown and active lease management at US Bank Tower. A management agreement was signed in Oct 16 with Oakwood Asia Pacific Ltd to operate serviced residences, Oakwood Premier OUE Singapore, at OUE Downtown which is expected to open by mid-2017. 
  • Occupancy rates at OUE Downtown and US Bank Tower remained steady at 87.0% and 74.3% as at end Sep 16, versus 85.3% and 74.6% as at end Jun 2016, respectively. 
  • Maintain BUY with an unchanged fair value estimate of S$2.17.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2016-11-03
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.170 Same 2.170