OUE Limited - OCBC Investment 2017-02-20: Expanding into healthcare real estate

OUE Limited - OCBC Investment 2017-02-20: Expanding into healthcare real estate OUE LIMITED LJ3.SI

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.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-02-20
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.170 Same 2.170