Overseas Union Enterprise

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vested

OUE (S$2.14/BUY/TP:S$4.03)

Removal of overhang offers buying opportunity. Recent unwinding of the financial transaction by Lippo removes overhang from confusion caused by this opaque transaction on concerns whether the shareholders were facing margin calls.

The negative impact on share price was acknowledged by the company and similar transactions are unlikely to be repeated again. We have been reiterating previous concerns were overdone.

We continue to like OUE for its quality Singapore-centric asset portfolio, and moving forward potential wild card from REIT listing may also galvanize share price by realizing embedded value of hotel portfolio.

Reiterate BUY and target price of S$4.03 based on 20% discount to RNAV.

Source: DMG

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JPM bought 934,000 shares increasing their stake from 4.96% to 5.06%

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Added to OUE on Friday, Sep 16

Catalysts:-
RNAV: $3.89 to $4.89
4Q 2011 Sin$750m Hotel Reit ?
Buybacks: EGM on Sep 28

http://info.sgx.com/webcoranncatth.nsf/ ... penelement


Risks:-

1) How's the occupancy at One Raffles Place Tower 2 ? ( completed 2011 )
2) 57% of leases expiring in Mandarin Gallery in 2012
3) 61% of leases expiring at DBS Building in 2013
4) How's the sale at the 462-unit Twin Peaks ( completed 2014 ) ?

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1) How's the occupancy at One Raffles Place Tower 2 ? ( completed 2011 )

At the One Raffles Place Tower 2 (40.8% owned), which is under construction, the management guided there has been pre-commitment of up to 1/3 of the leasable space prior to completion in 1Q12, and we believe it is not difficult to secure up to 2/3 commitment by that time.

Source: Phillips

2) 57% of leases expiring in Mandarin Gallery in 2012

3) 61% of leases expiring at DBS Building in 2013

4) How's the sale at the 462-unit Twin Peaks ( completed 2014 ) ?[/quote]


Maintain Buy with fair value cut to $2.84

We adjust our rental and occupancy rate assumptions for OUE offices and RNAV is lowered
from $4.13 to $4.06. We ascribe a 30% (previously 0%) discount to RNAV of OUE to reflect
the current slowdown in economy and weaker office leasing market. Fair value is thus lowered to $2.84.

We maintain our Buy recommendation given the current attractive valuation. PBR at the
current price is at historical low of 0.67x (close to -2sd), compared to 0.75x seen in previous
trough.

Note that OUE has more office properties in its book now (mark to market value on
annual basis) compared to the previous cycle, when the property group held predominantly
hotel assets.

Downside risk could arise from downward revaluation of office assets in the event of a recession, when demand for new office space fall drastically.

Source: Phillips

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Vested

Buyback of 200,000 shares on Sep 29

Buyback of 300,000 shares on Sep 30

Buyback of 1.58m shares on Oct 3

Buyback of 1.36m shares on Oct 4

Buyback of 1.18m shares on Oct 5

Buyback of 1.72m shares on Oct 6

Buyback of 1.14m shares on Oct 7


Volume on Friday, Oct 7, 2011 = 1.7m shares

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vested

Buyback of 800,000 shares on Oct 11

Buyback of 391,000 shares on Oct 10

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Buyback of 400,000 shares on Oct 12

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We retain our end June 2012 price target of S$2.00/share, based on 1 s.d. below the long-term average discount to RNAV for smallmid cap Singapore developers.

Key risks:

Key upside risk would come from faster-than-expected leasing activities at OUE Bayfront and One Raffles Place.

On the downside:
1) a further substantial decline in the Singapore commercial property values caused by a worse-than-expected rental trajectory;
2) an inability to absorb the office supply coming on stream;
3) a reversal in the currently buoyant liquidity conditions and
4) a rise in interest rates.

Source: JPM

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Vested

Buyback of 1.23m shares out of 1.93m shares traded today

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Vested

Buyback of 2.8m shares out of 4.8m shares traded today