OUE Ltd - OCBC Investment 2017-05-12: A Picture of Overall Health

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OUE LIMITED LJ3.SI

OUE Ltd - A Picture of Overall Health

• 1Q17 results broadly in line.
• Reversal of Twin Peaks impairments.
• Upbeat about IHC portfolio assets.

Higher PATMI mainly due to reversal of OUE Twin Peaks impairments 

• OUE’s 1Q17 PATMI increased 85.3% YoY to S$15.37m mostly due to reversal of impairment losses on OUE Twin Peaks and lower finance expenses. This was despite 1Q17 EBIT falling 49.1% YoY to S$35.0m mainly because of higher administrative expenses and the absence of S$19.6m provisional negative goodwill recognized from equity accounted investees over the same period last year. 
• In terms of the topline, it grew 60.3% to S$196.3m mainly due to a firmer revenue contribution from the property development division, which increased S$67.9m YoY to S$72.6m given more unit sales at OUE Twin Peaks.
• We understand that the revenue recognized only relates to the units sold where the completion of sales had occurred, while the revenue relating to the units sold under deferred payment schemes are deferred until the completion of sale although non-refundable deposits were collected. 
• Revenues from the group’s hospitality and property investments divisions increased marginally by 0.1% YoY and 5.7% YoY to S$51.9m and S$68.0, respectively, due to the enlarged room inventory at Crown Plaza Changi Airport and stronger performances from all the investment properties in the group’s portfolio. 
• Accounting for one-time items, we judge this quarter’s numbers to be broadly in line with expectation and 1Q17 PATMI now forms 19.7% of our full year forecast.

AEI at OUE Downtown almost complete 

• The asset enhancement initiative at OUE Downtown is almost complete, with Downtown Gallery and Oakwood Premier OUE Singapore ready to begin operations in 2H17. 
• The group also continues to clock sales at OUE Twin Peaks through active marketing efforts and 411 units (out of 462 total units) have been sold as at 31 Mar 2017, up from 384 units as at end 2016. 
• Finally, management sounded upbeat about its recent acquisition of IHC and expressed confidence in adding value to the healthcare real estate portfolio.
• Maintain BUY with an unchanged fair value estimate of S$2.17.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-05-12

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.170 Same 2.170