Share Price S$2.49
Target Price S$3.12
Overseas Union Enterprise (OUE) is a real estate owner, developer and operator with diversified asset exposure to the prime office, hotel, retail and residential segments. Total asset size tops S$5b with more than 90% of its asset base in Singapore. Over the last few years, the group has been leveraging its expertise to invest and develop in the retail, commercial and residential property segments.
• Potential listing of OUE Commercial Trust is the next key catalyst in 2014 with assets including OUE Bayfront (S$1.08b) and Lippo Plaza in Shanghai. Ms Tan Shu Lin, the former head of Capital Markets at Ascendas REIT, will be the CEO of the proposed OUE Commercial Trust. Management has reiterated that a successful listing could mean yet another similar special dividend such as for OUE Hospitality REIT (10-20 cents/share) and a vehicle to realise value for its other commercial properties in Singapore (OUE Downtown and One Raffles Place).
• US$368m US Bank Tower (USBT) acquisition asset enhancement plans are being finalised, with the proposed development of restaurants and an observation deck on the top four storeys of USBT, serviced apartments and hotels, a retail podium, and a refurbished lobby with separate entrances for different facilities.
• Look ahead to asset enhancements with One Raffles Place retail podium due to be completed by 1Q14 (with H&M as an anchor tenant), and work at the retail podium at OUE Downtown (150,000sf of retail space) is underway (S$140m capex, estimated completion 2016). The potential conversion of 163,000sf of space at OUE Downtown into serviced apartments (163,000sf, S$50m capex) and the construction of a new annex at Crowne Plaza (S$70m) are pending final approval from the authorities.
• One tower at Twin Peaks to be retained for rental purposes with full serviced apartment facilities. Although the authorities have denied permission for conversion into serviced residences, OUE can still lease out the apartments to long-staying tenants. Some 78 units (out of 462 units) at Twin Peaks had been sold by Sep 13 (up from 76 in 2Q13).
• Maintain BUY, target price of S$3.12 is pegged at a 30% discount to RNAV of S$4.55/share. The share price is trading at a steep 48% discount to RNAV.
Publish date: 28/11/13