Overseas Union Enterprise

[winston]

Not vested

OVERSEAS UNION ENTERPRISE - Property developer Overseas Union Enterprise said on Wednesday its third quarter net profit jumped by over 16 times to S$127.1 million from the year ago period, driven by higher sales from its hospitality division and a fair value gain of S$128.4 million from the acquisition of two office towers.

Source: Reuters

[winston]

Not vested. From CIMB

Overseas Union Enterprise - 3Q10 results

Stronger book values 3Q10 core net profit of S$20m forms 29% of our FY10 forecast.

We believe the results are in line with consensus as well. 9M10 core earnings form 79% of our forecast.

Revenue remained powered by hotels. Rental income from DBS Towers (DBST) will contribute more meaningfully in 2011. There was upward revaluation of its undervalued assets in the quarter which could herald more to come.

We keep our earnings estimates but raise our RNAV from S$4.36 to S$4.58 on further refinements to our office cap values.

We lower our discount to RNAV from 15% to 10% as we see a further narrowing of its valuation gap.

This lifts our target price from S$3.71 to S$4.12. Its commercial assets remain its key attribute and we continue to expect catalysts from a further rental recovery and accretive acquisitions.

[winston]

On CNBC:-

Interview with Stephen Riady.

Asset Enhancement would be the catalyst going forward.

But how's the valuation now ?

[winston]

From Lim & Tan:-

OUE ($3.30, up 3 on Friday) and CEO Stephen Riady were well-written up in the latest issue of the Edge, including a broking house’s estimate of OUE’s RNAV of $4.36 a share, suggesting the stock is trading at 24% discount.

We agree with the general thrust of the recommendation of the stock as an “office” play.

[winston]

Not vested. From UOBKH:-

Potential Singapore REIT in the hat.

Singapore accounts for more than 95% of OUE’s assets. Management strategy is to maintain at least 90% of its assets in Singapore over the long term with 70% of earnings coming from the office, hospitality and retail segments.

We view OUE’s portfolio as a potential REIT in the making to capitalise on strong recurrent income streams.


Initiate with a BUY, target price of S$4.25 pegged at parity to FY11 RNAV,
presenting a 25% upside potential from current share price levels.

We forecast a minimum FY11/12 yield of 2.6/3.3% based on a 50% dividend payout.

[winston]

Not vested

Overseas Union Enterprise Ltd – Initiation (Bryan Go)
Recommendation: Buy
Previous close: S$3.60
Fair value: S$4.28


Investment merits

· Riding on the buoyant office and hospitality sectors with 48% and 23% of its GAV derive from office and hotel properties. These sectors are expected to remain positive in 2011 supported by sound economic fundamentals in the region.

The management indicates interest in growing the present hotel management business from the current 6 to 30 hotels in 5 years time.

· Asset enhancement potential in DBS Towers with options of redevelopment into residential or mixed-use development. Remaining status quo is also a viable option as the current average rental is relatively low at $5.20 psf, any lease renewal will see rental upside revision of at least 30%.

· Spinning off assets into real estate investment trust (REIT) is another excellent option available to OUE as a move to crystallize its investment value while retaining a controlling stake over the properties. Hospitality trust for the hotel portfolio is another viable option to OUE.

· Experienced management team lead by Executive Chairman Stephen T. Riady from Lippo Group.


Key Risks

· Short remaining tenure in leasehold properties such as Mandarin Orchard and DBS Towers warrant a discount in assets valuation. Lease renewal is another uncertainty.

· Asset-heavy balance sheet exposes OUE to extensive revaluation risk in volatile market.

· Higher than expected vacancy rate in office buildings.

· Susceptible to tourist arrivals trend.


Initial coverage on OUE with Buy recommendation at fair value of $4.28 with zero premium/discount applied to its RNAV, representing an upside of 18.89% over the latest closing price of $3.60.


Source: Phillips

[winston]

Not vested

Initiate OUE with BUY at target price of S$4.20, pegged at 15% discount to FY11F RNAV of S$4.70.

OUE’s sizeable office exposure (56% of RNAV) offers investors an alternative proxy to play the rebounding office sector.

OUEB and ORP2 should benefit from limited new Grade A supply, minimal competition from existing stock and rising demand for newer schemes.

We see further RNAV accretion from
(1) near-medium term office acquisitions and
(2) potential redevelopment of DBS Towers which could yield S$0.11 - 0.38/sh.

Trading at 28% discount to RNAV (vs. sector’s 2%), OUE’s valuations appear undemanding.


Source: DMG

[winston]

Not vested

Credit Suisse Int selling up to $116mln stake in OUE-IFR

HONG KONG Jan 18 (Reuters) - Credit Suisse International is selling up to a $116 million stake in Singapore hotel operator Overseas Union Enterprise (OVES.SI), IFR reported on Tuesday.

The shares are being offered at a range of S$3.35-$3.50 each, a 2.2-6.4 percent discount to its last traded price. Credit Suisse (CSGN.VX) is the sole bookrunner.

The offer is being made in connection with a hedge that Credit Suisse International is implementing for a financing it had entered into with Golden Conchord Asia, which owns a 15.9 percent stake in OUE, the report added.

http://www.reuters.com/article/idUSTOE70H05C20110118

[winston]

Not vested

Singapore Hot Stocks-Singapore's OUE down on stake sale

SINGAPORE, Jan 19 (Reuters) - Shares of Singapore hotel operator Overseas Union Enterprise fell as much as 4.5 percent on Wednesday after a report that Credit Suisse International is selling up to a $116 million stake.

IFR reported that the shares are being sold at a range of S$3.35-$3.50 each, a 2.2-6.4 percent discount to its closing price on Tuesday. Credit Suisse is the sole bookrunner. [ID:nTOE70H05C] At 0106 GMT OUE shares were down 3.9 percent at S$3.44 on a volume of 1.7 million shares.

The offer is being made in connection with a hedge that Credit Suisse International is implementing for a financing it had entered into with Golden Concord Asia, which owns a 15.9 percent stake in OUE, the report added.


Source: Reuters

[winston]

vested

DJ MARKET TALK: Correction In OUE A Buying Opportunity -UOB-KH

0612 GMT [Dow Jones] OUE (LJ3.SG) is down 3.9% to S$3.44, with volume spiking to over 54 million shares, making OUE the second most active stock today after IFR

Markets reported Tuesday, without citing any sources, that Credit Suisse International is selling up to a US$116 million stake in the hotel operator, with CS as the sole bookrunner on the deal.

The report says the shares are being offered in a range of S$3.35-$3.50 each, which are at a discount of 2.2%-6.4% to OUE's Tuesday close.

UOB KayHian analysts Vikrant Pandey and Vijay Natarajan say they understand from the OUE management that there has been no share sale or placement. "Instead, there has been a share financing arrangement by major shareholder Golden Concord Asia Limited which has been misinterpreted."

The analysts say management will be issuing a clarification announcement soon.

"We view any near-term share price correction as a buying opportunity and reiterate our Buy call with a target price of S$4.25."

Source: Dow Jones Newswires