Overseas Union Enterprise

[winston]

Vested

Feedback from Europe NDR - by Donald Chua
(OUE SP / OVES.SI, OUTPERFORM - Maintained, S$2.96 - Tgt. S$4.16, Property Devt & Invt)

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During a recent non-deal road show in Europe, investors asked if OUE plans to raise further equity capital, venture into China or list its hotel assets in the near term.

OUE reiterated that there would not be any more placements of vendor shares for refinancing purposes, and that it would remain a pure Singapore player.

A hotel REIT is an option but only when its asset base reaches a critical mass. Its focus is on delivering results, enhancing asset value and exploring acquisitions. An expected surge in its recurring income and its exposure to prime office and hotel sweet spots also sat well with investors.

Maintain earnings forecasts and target price of S$4.16 (10% discount to RNAV). OUE is one of our top sector picks, with catalysts expected from higher commercial rents, hotel RevPAR and more accretive acquisitions in Singapore.

Source: CIMB

[winston]

Vested

Initiate as our key sector BUY; CapitaLand, but 10 years ago

We initiate OUE with a BUY and a S$4.16 target, implying an upside of 39%. Our TP is pegged at 15% discount to S$4.89/share RNAV estimate.

OUE’s strategy of building strong recurring income, while enhancing old assets and identifying undervalued assets in the market is similar to what CapitaLand did especially between 2004 and 2006, over which period the stock returned 65% pa.

Furthermore, office and hospitality remain our most preferred segments in the property sector. Asset recycling, through the establishment of office and hospitality REITs, are potential share price catalysts.


Lippo still holds 67% stake; share pledge is behind us

Lippo Group, the controlling shareholder, owns 67% stake of OUE. However, its direct stake in OUE was reduced to 61.6% after pledging 53.2m shares to Credit Suisse (CS) in January as part of its loan refinancing. Lippo has the option to purchase back the shares at market value within the next six years from CS in an agreement.

Management has realised the confusion caused by the share pledge, and has said it will not repeat this. However, it has indirectly created an additional free float, since CS has placed out most of the shares. The share price fell 14% in one month, as a results (Refer to Fig 2).


Investment risks

One of the key risks to our positive view on the stock is the slower-than expected commercial leasing activities. OUE has yet to find tenants for One Raffles Place Tower 2, which will be completed by end of this year.

Furthermore, the large amount of leases expiring in Mandarin Gallery in 2012 (57% of NLA) and DBS Building in 2013 (61%) acts as a double-edged sword.

The commercial leasing demand is highly dependent on the economic outlook at that point. On the hospitality front, we are mindful of the volatility nature of the business, which can be adversely affected by external factors (ie. natural disasters, pandemics and terrorists attacks).

On its one and only residential development, Twin Peaks, we believe OUE will find it challenging to sell in the current environment. Sales in the 462-unit condo have been slow with 8% sold to date since its September-2010 launch. The policy overhang in the Singapore residential market has also affected the outlook of high-end homes.


Source: CLSA

[winston]

vested

Overseas Union Enterprise (OUE SP, $3.09) – Looks to be well-supported at $2.95.

If this holds firm, the stock could resume upward momentum. RSI (14) is rising gradually above the neutral level, suggesting momentum is gaining strength.

Source: Kim Eng

[winston]

Vested

Jackie Chan, Wakin Chau buy Leonie Hill Rd condos By KALPANA RASHIWALA


(SINGAPORE) Hong Kong movie superstar Jackie Chan and his good friend singer/song writer Wakin Chau have again picked up a few apartments - this time in Overseas Union Enterprise's Twin Peaks condo at Leonie Hill Road.

Twin Peaks: Units in the 99-year leasehold project are trading at an average price of about $2,850 psf but the two celebrities are reckoned to have enjoyed discounts BT understands that Mr Chan has bought two units on one of the lower floors of the 35-storey project, while Mr Chau purchased a unit on another floor.

All three units are said to be one bedders of 571 square feet each. Units in the 99-year leasehold project are trading at an average price of about $2,850 per square foot although market watchers reckon the two celebrities would have enjoyed a discount given the star attraction they would bring to the development, which is expected to be completed around early 2014.

Mr Chau, previously known as Emil, held a concert in Singapore about a fortnight ago.

Interestingly, Mr Chan used to own a three-bedroom apartment in the old Grangeford Apartments which OUE bought through a collective sale a few years ago and which is being torn down for redevelopment into Twin Peaks.

Residents of Twin Peaks, at the corner of Grange and Leonie Hill roads, will have the option of engaging hospitality and housekeeping services from the Mandarin Orchard Singapore, which is also part of the OUE group. BT understands that the units bought by Mr Chan and Mr Chau will have views of Grange Road/ Orchard Road.

In March last year, the duo picked up four apartments in the freehold Centennia Suites at Kim Seng Road worth over $10 million. In that deal, Mr Chan acquired three units - two, three and four bedders making up an entire floor - while Mr Chau purchased a three bedder.

The average price in the project then was reported at about $2,000-2,100 psf. Centennia Suites is being developed by a privately held entity of Lippo Group. The Indonesian group also controls OUE, which is listed in Singapore.

Mr Chan also bought the former Jinriksha Station at 1 Neil Road in late 2007 for $11 million.

Twin Peaks comprises two identical 35-storey towers with a total of 462 units, offering a mix of one, two and three-bedroom apartments. OUE began selling units in the project in July last year and to date more than 50 units have been sold. The highest price achieved in the development is $3,170 psf.

OUE is expected to relaunch the project later this year once its new showflat is ready.

Source: Business Times

[winston]

vested

Valuation and rating analysis
Jun-12 price target of S$3.40

We derive our Jun-12 price target at S$3.40/share, based on 25% discount to our forward RNAV of S$4.58/share. The 25% discount is equal to the historical average discount we apply for small cap players under our coverage in Singapore (Allgreen, Guocoland, Wheelock and Wing Tai).

At our price target of S$3.40/share, the stock would be trading at 1.0x FY12E P/B and 15.1x FY12E P/E. The stock is currently trading at 0.84x FY12E P/B and 12.8x FY12E P/E.

Source: JPM

[winston]

Vested

RESEARCH ALERT-IIFL starts OUE at buy, target S$3.76

SINGAPORE, July 7 (Reuters) - IIFL has initiated coverage of Singapore property developer Overseas Union Enterprise (OUE) at buy with a target price of S$3.76.

STATEMENT: All of OUE's assets are in prime locations in Singapore, and the firm is well-positioned to ride the growing momentum in the hospitality sector and rental upside for grade-A offices.

"With a presence across hospitality, office, retail, and high-end residential segments, Overseas Union Enterprise (OUE) is a pure play on the Singapore property sector," said IIFL in a report.

With an interest in over 2,000 rooms in Singapore, OUE will benefit from strong tourist arrivals and IIFL said it expects the company to record a steady 85 percent occupancy rate and 10 percent growth in average room rates a year over the next two years.

OUE shares have fallen about 13 percent since the start of the year to close at S$2.85 on Wednesday.

Source: Reuters

[winston]

Vested. How come all these 'expert" analysts did not say anything about their Convertible Bonds ?

Best proxy to Singapore commercial exposure, resume coverage with BUY.

With KepLand’s divestment in key assets ORQ and MBFC Phase 1 reducing office exposure to c.34%; we highlight OUE as a key pick for a pure play on Singapore assets, with c.51% of OUE’s RNAV backed by office assets including OUE Bayfront, and 26% hospitality exposure anchored by flagship Mandarin Orchard Hotel.

Stock is currently trading at 0.9x P/B and steep discount of 42% to RNAV.

We resume coverage of OUE with a target price of S$4.03 based on 20% discount to RNAV, translating to 38% upside.


Source: DMG

[winston]

vested

We initiate coverage of Overseas Union Enterprise (OUE) with an Outperform and a S$3.70 target price, based on a 20% discount to RNAV of S$4.62.

We like OUE’s core exposure to the office (52%) and hospitality (25%) sectors, which we think should continue to benefit from rental and RevPAR growth.

OUE has only 10% of assets in Singapore residential, which shelters it from concerns about more policy measures in the sector.

Source: Macquarie

[winston]

Vested

OVERSEAS UNION ENTERPRISE - Singapore's Overseas Union Enterprise said on Wednesday its second quarter profit after tax rose 20 percent year-on-year to S$20.1 million, boosted by contributions from its hospitality and property investment divisions.

Source: Reuters

[winston]

Vested. Why no comment on their Convertible Bonds ?

With the recent slowdown in office leasing momentum, OUE has underperformed the STI by 4-6% over the past 1-3 months, and trades at a steep 39% discount to our S$4.67 RNAV.

We remain constructive on the prime office and hotel sectors it has 77% exposure to. Catalysts include potential spin-off the assets into REITs.


Source: CS