OUE Limited - Phillip Securities 2021-09-07: Diversified Real-Estate Conglomerate

OUE LIMITED (SGX:LJ3) | SGinvestors.io OUE LIMITED (SGX:LJ3)

OUE Limited - Diversified Real-Estate Conglomerate

  • OUE (SGX:LJ3) owns, develops and manages commercial, hospitality, retail and residential assets. It also has interests in the consumer and healthcare sectors.
  • OUE is the sponsor of OUE Commercial REIT (SGX:TS0U), which divested 50.0% of OUE Bayfront, OUE Tower and OUE Link in March 2021 at a 26.1% premium over purchase consideration.
  • Indirect associate acquired a 32% stake in Matahari, the largest departmental store in Indonesia. This brings OUE’s effective stake to 19% and expands its consumer segment which historically contributes 2% to topline.
  • When relaunched in 2022, OUE’s Mandarin Orchard Singapore is expected to become Hilton’s flagship hotel in Singapore and the largest Hilton hotel in the Asia Pacific.



OUE - Company background

  • OUE is a diversified owner, developer and operator of real estate in Asia. It manages landmark assets in the commercial, hospitality, retail and residential sectors. It is also the sponsor of OUE Commercial REIT.
  • In 2017 and 2018, OUE expanded into the healthcare sector with the acquisition of OUE Lippo Healthcare (SGX:5WA) and First REIT (SGX:AW9U).
  • In 2019, it entered the consumer sector with OUE Restaurants. Singapore is its largest revenue contributor, at 83% of FY20 revenue.


Investment Highlights

OUE Commercial REIT’s 50% divestment of OUE Bayfront, OUE Tower and OUE Link.

  • On 31 March 2021, OUE Commercial REIT divested 50.0% of OUE Bayfront, OUE Tower and OUE Link to a limited liability partnership 50% owned by OUE Commercial REIT and 50% by a special purpose vehicle managed by Allianz Real Estate Asia Pacific Pte. Ltd. The property has been enjoying above-market occupancy with significant growth in passing rents since the REIT’s listing.
  • Main reasons for its divestment were an opportunity to realise capital appreciation, optimise the group’s capital structure and increase its financial flexibility. Deal value of S$1,267.5mil represented a 26.1% premium over the property’s purchase consideration in 2014. Net proceeds of S$262.6mil were used to redeem convertible perpetual preferred units and pare down debt to optimise OUE Commercial REIT’s capital structure.

Acquisition of Matahari for consumer expansion.

  • On 15 July 2021, OUE completed a voluntary tender offer by indirect associate, Auric Digital Retail Pte. Ltd. (ADR). ADR is a 60:40 JV between OUE Retail Holdings Pte. Ltd, a wholly-owned subsidiary of OUE, and Auric Bespoke I Pte. Ltd. It acquired up to 40% of PT Matahari Department Store Tbk (LPPF IJ) in Indonesia. Post-acquisition, ADR has become Indonesia.

Mandarin Orchard Singapore to become largest Hilton hotel in APAC in 2022.

  • In March 2020, OUE rebranded Mandarin Orchard Singapore into Hilton Singapore Orchard. This leverages are eased.

Opportunistic recycling of capital.

  • In June 2020, OUE acquired a land parcel in economic environment.


OUE's Revenue

  • OUE has three revenue sources: investment properties, development properties and hospitality. Before COVID, investment improve from 2H21.


OUE's Expenses

  • FY16-20 gross margins were 56-64% lower revenue, 1H21 profit was S$52mil vs a S$186mil loss in 1H20.


OUE’s Assets


Commercial

  • OUE Bayfront is a landmark commercial development on Singapore’s waterfront at Collyer Quay in the CBD. It is advantageously positioned between Marina Bay downtown and the established financial hub of Raffles Place. Comprising 18 floors of premium Grade-A office space that command panoramic views of Marina Bay, it also has two complementary properties, OUE Link and OUE Tower. OUE Bayfront is part of OUE Commercial REIT’s portfolio. As of 31 December 2020, OUE Bayfront’s committed occupancy was 99.8%. With a GFA of 503.5k sq ft, the property was valued at S$1.2bn. On 31 March 2021, OUE Commercial REIT divested 50.0% of OUE Bayfront, OUE Tower and OUE Link.
  • OUE Downtown comprises Grade-A office space at the OUE Downtown mixed-use development along Shenton Way. It encompasses the 35th to 46th storeys of OUE Downtown 1, a 50-storey high-rise tower, and the 7th to 34th storeys of OUE Downtown 2, a 37-storey high-rise tower. OUE Downtown Office is part of OUE Commercial REIT’s portfolio. As at 31 December 2020, OUE Downtown Office’s committed occupancy was 92.1%. With a GFA of 752.6k sq ft, the property was valued at S$900.0mil.
  • One Raffles Place is a prominent integrated development smack in the heart of Singapore’s main financial district. It comprises One Raffles Place Tower 1, a 62-storey Grade-A office building with an observation deck; One Raffles Place Tower 2, a 38-storey Grade-A office building; and One Raffles Place Shopping Mall, a six-storey retail podium situated above the Raffles Place MRT interchange station. One Raffles Place is part of OUE Commercial REIT’s portfolio. As of 31 December 2020, committed occupancy was 92.1%. With a GFA of 605.3k sq ft, the property was valued at S$1.8bn.
  • Lippo Plaza is a 36-storey Grade-A commercial development adjoined by a 3-storey retail mall with basement units. This landmark building is located near the eastern end of Huaihai Zhong Road, a major retail artery in the established Huangpu business district in Puxi, downtown Shanghai. Lippo Plaza is part of OUE Commercial REIT’s portfolio. As of 31 December 2020, Lippo Plaza’s committed occupancy was 86.4%. With a GFA of 630.0k sq ft, the property was valued at S$545.6mil.
  • The South Jakarta Development Project is located on Jalan Sudirman within the Golden Triangle of Jakarta. This is one of the most rapidly developing sites in South Jakarta’s CBD. Acquired in June 2020, the project will transform the South Jakarta skyline with a super high-rise mixed development featuring Grade-A offices and a lifestyle hotel when completed in 2026. With a land area of 86.1k sq ft, development value is IDR1,420.0bn.

Hospitality

  • Mandarin Orchard Singapore is an upscale hotel along Orchard Road, a top accommodation choice for international travellers seeking to stay in the heart of Singapore’s shopping district. Featuring 1,077 rooms across the 37-storey Main Tower and 39-storey Orchard Wing, its extensive facilities include five food and beverage outlets that are popular with locals and tourists alike. It also has more than 30,000 sq ft of meeting and function room space. Mandarin Orchard Singapore is part of OUE Commercial REIT’s portfolio. With a GFA of 990.2k sq ft, the property is valued at S$1.2bn.
  • Crowne Plaza Changi Airport is a 563-room hotel managed by the InterContinental Hotels Group. It is at Terminal 3 of Changi Airport, with direct access to all passenger terminals and Jewel Changi Airport. The hotel comprises a 320-room main building and an adjacent 243- room extension, connected via a linkway on the second floor. Crowne Plaza Changi Airport is part of OUE Commercial REIT’s portfolio. With a GFA of 440.4k sq ft, the property is valued at S$468.5mil.

Retail

  • Mandarin Gallery is a high-end retail mall occupying four levels of the Mandarin Orchard Singapore hotel. From international fashion brands and boutique designer labels to unique lifestyle and F&B offerings, the mall has a differentiated tenant mix and provides a high degree of visibility with its 152m frontage facing Orchard Road. Mandarin Gallery is part of OUE Commercial REIT’s portfolio. As of 31 December 2020, committed occupancy was 91.1%. With a GFA of 193.3k sq ft, the property was valued at S$473.0mil.
  • Downtown Gallery comprises 150,000 sq ft of premium retail space spread over six levels, including one basement. It houses bold new retail and lifestyle concepts. Part of the redeveloped OUE Downtown on Shenton Way, its 262m frontage is one of the longest single retail frontages in the commercial district. It boasts more window display space than any comparable development in the area. As of 31 December 2020, Downtown Gallery’s committed occupancy was 90.0%. With a GFA of 226.9k sq ft, the property was valued at S$230.0mil.
  • One Raffles Place Shopping Mall is the largest purpose-built mall in Raffles Place, the heart of Singapore’s financial district. It covers 100,000 sq ft of retail space. Sitting above the Raffles Place MRT station with a direct basement link to the station, it enjoys excellent connectivity along the North-South and East-West MRT lines. It also offers easy access via underground walkways to other developments in Raffles Place and Marina Bay. One Raffles Place Shopping Mall is part of OUE Commercial REIT’s portfolio. As of 31 December 2020, committed occupancy was 94.8%. The property is part of One Raffles Place integrated development.

Residential

  • OUE Twin Peaks is a luxury residential development nestled in Leonie Hill, a stone’s throw from Singapore’s bustling Orchard Road. The development’s two identical 35-storey towers house 462 one-, two-and three-bedroom apartments, with facilities for fitness, leisure and entertaining for residents to experience urban resort living. As of 31 December 2020, its book value was S$29.0mil.

Healthcare

  • OUE Lippo Healthcare (SGX:5WA) is an integrated healthcare service and facility provider in Japan, China, Myanmar, Indonesia and Malaysia. In December 2020, OUE Lippo Healthcare signed an agreement to lease and operate an obstetrics and gynaecology hospital via a 50:50 JV with state-owned conglomerate, China Merchants Group. Foundation work has also commenced on the Prince Bay International Hospital in Shenzhen, China. The hospital is expected to be commissioned by 2024 and will provide premium specialist services to high-end customers in the Greater Bay Area. As of 31 December 2020, OUE Lippo Healthcare was valued at S$388.8mil.

Consumer

  • OUE Restaurants is a portfolio of restaurants, cafes and bars that offers fine to casual gastronomy. Its experiential restaurants include VUE Bar and Grill, Hashida Singapore and Takayama. Shisen Hanten by Chen Kentaro, Chatterbox and Lippo ChiuChow cater to local and international palates with their local and Szechwan offerings. Other fast casual, lifestyle-driven concepts are Délifrance, Alfafa and Maxx Coffee.

REITs

  • OUE Commercial REIT (SGX:TS0U) is managed by OUE Commercial REIT Management Pte. Ltd., a wholly-owned subsidiary of OUE. Listed on 27 January 2014, OUE Commercial REIT is one of the largest diversified Singapore REITs with assets of S$6.8bn as at 31 December 2020. With seven commercial and hospitality properties in Singapore and Shanghai, it has more than 2.0mil sq ft of prime office and retail space and 1,640 upscale hotel rooms. OUE’s effective interest in OUE Commercial REIT as at 31 December 2020 was 48.0%.
  • First REIT (SGX:AW9U) is Singapore’s first healthcare REIT listed in 2006. On 26 October 2018, OUE and OUE Lippo Healthcare (SGX:5WA) acquired 60.0% and 40.0% stakes, respectively, in the manager of First REIT. First REIT has 20 healthcare properties with stable cash flows and long leases in Indonesia, Singapore and South Korea, 15 in Indonesia alone. Other assets in Indonesia include the Imperial Aryaduta Hotel & Country Club, Hotel Aryaduta Manado, Lippo Plaza Kupang and Lippo Plaza Buton. First REIT also has nursing homes in Singapore and Sarang Hospital in South Korea, which provides rehabilitative and nursing healthcare services in Yeosu City.


Outlook






Tan Jie Hui Phillip Securities Research | https://www.stocksbnb.com/ 2021-09-07
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998



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