Thursday, January 16, 2014

OUE -Commercial REIT – Preliminary Prospectus (Phillip)

OUE Limited
Target Price (SGD) 2.78
Forecast Dividend (SGD) 0.05
Closing Price (SGD) 2.48
Commercial REIT – Preliminary Prospectus

• OUE Commercial REIT lodged preliminary prospectus with MAS
• Initial Portfolio – The OUE Bayfront Property and The Lippo Plaza Property
• IPO to raise S$346 million
• Indicative Distribution Yield of 6.8% in 2014, 6.89% in 2015
• Maintain Accumulate Rating with revised TP $2.78

What is the news?
OUE Commercial Real Estate Investment Trust (“OUE C-REIT”)’s investment strategy is to invest in a portfolio of income-producing commercial properties in prime commercial districts within and out of Singapore. The preliminary prospectus has been lodged with MAS on 10 Jan 2014.

Highlights from the preliminary prospectus: OUE C-REIT is offering a total of 433M of units at offering price $0.80 per unit, potentially raising approximately S$346M. This amount includes S$166M from a public offer of 208M units and another S$180M raised from a cornerstone investors-subscription for 225M units(Summit SPV,Mr Gordon Tang, Mdm Chen Huaidan, Mr Yang Dehe and RHB Asset Management Sdn Bhd). OUE will receive about 433M units as part consideration (50% of the total units). The projected DPU yield is 6.8% for FY14 and 6.89% for FY15 including income support.

The initial portfolio will consist of two assets; 1) OUE Bayfront (office and retail property in Singapore), and 2) Lippo Plaza (office and retail property in Shanghai).

How we view this
The divestment of OUE Bayfront will allow OUE to unlock and recycle the capital for future investment / development projects for higher growth opportunities. The establishment of OUE C REIT will augment OUE’s fund management business, thus enjoying a high recurring income stream. We are positive that the asset spin off plan is on track. However, while the favorable industry and economics conditions support the OUE C-REIT’s stable recurring income, the weak financing profile of OUE C-REIT (aggregate leverage 42.6%) may impede the financial flexibility for future developments in near term.

Investment Action
We have revised our TP to S$2.78 after factoring in higher expenses with FY2014 estimates introduced. The valuation has not taken into account the asset spin off and proposed distribution in specie upon successful list of OUE C-REIT. We maintain Accumulate rating.

Source/Extract/Excerpts/来源/转贴/摘录: Phillip-Research,
Publish date: 14/01/14

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