OUE kept at 'buy' amid plans to clean up house

OUE kept at 'buy' amid plans to clean up house

Stanislaus Jude Chan
19/11/18, 04:23 pm

SINGAPORE (Nov 19): Deutsche Bank is keeping its “buy” recommendation on OUE with an unchanged target price of $3.00, amid plans by the real estate group to cash up for the next phase of growth.

“OUE stated that it is pursuing a fund management platform listing in the first half of 2019,” says lead analyst Joy Wang in a report on Nov 12.

“Based on current EBITDA, management estimates that the platform could be valued at between $300-400 million, based on a 11-13x P/E multiple. Funds would be used to benefit and help grow the REITs under management,” she adds.

OUE and subsidiary OUE Lippo Healthcare in September announced the proposed acquisition of Bowsprit Capital Corporation, the manager of SGX-listed First REIT.

Executive chairman Stephen Riady said the company is targeting asset under management growth to over $10 billion by 2019, from approximately $8.0 billion currently.

“Management believes that there are significant value unlocking opportunities within First REIT and OUE Lippo Healthcare, especially with regard to land banks in Indonesia and Malaysia, as well as optimisation of operations,” says Wang.

“Management stated that its strategy for the next 6-9 months will be to clean up its structure and investments, with an aim to be in a net cash position in 1H next year,” she adds.

Among these are the sale of the group’s stake in Gemdale Properties and Investment Corporation (GPI), a real estate developer principally engaged in property investment, development and management of residential, commercial and business park projects in Greater China.

“The company highlighted that it has already started to notify fund managers of its intention to redeem funds, and has received offers for its stake in Gemdale,” says Wang.

“We believe that the disposal of these investments could result in losses from disposal. Nevertheless, management noted that it believes significant opportunities could arise in the next 12-24 months, and it will look to optimise its balance sheet in anticipation,” she adds.

In addition, she says OUE has also revealed it is in final negotiations regarding the sale of US Bank Tower, and expects to finalise the disposal in January 2019. US Bank Tower was acquired at US$367.5 million last valued at US$605 million.

Hyflux gets non-binding letter of intent from China suitor

SINGAPORE (June 15): Hyflux has received another non-binding letter of intent (LOI) for a potential investment in the group by an investor based in China. In a Friday night filing, Hyflux says the investor is a subsidiary of a state-owned enterprise in the industrial field which works on a global scale to provide comprehensive power services. “Other fields of expertise of the investor’s holding company include wind and solar energy solutions, nuclear industry, medical technology and agriculture,” says Hyflux. See: Rags-to-riches tale goes sour for Hyflux founder Olivia Lum Se....

Hong Kong suspends China extradition bill

(June 15): Hong Kong’s leader suspended efforts to pass a bill allowing extraditions to China, in a dramatic reversal that she said was necessary to restore order in the Asian financial hub and avoid further violence and mass protests. Carrie Lam, Hong Kong’s chief executive, announced the legislative “pause” at a news conference Saturday, even as activists asked hundreds of thousands of residents who marched in protest last weekend to return to the streets and demand her resignation. Lam acknowledged that debate had shattered a period of relative calm in the former British colony, ....

Chip Eng Seng in joint $47.5 mil investment of China distressed property company

SINGAPORE (June 15): Chip Eng Seng and controlling shareholder Haiyi Investment are jointly investing RMB240 million ($47.5 million) in a distressed property company based in Taicang city in Jiangsu province, China. Chip Eng Seng says the investment will enable the project company to discharge its outstanding liabilities such that its assets will be unsealed and restart a project involving the development and construction of a residential development on a land area of 38,000 sqm, with a gross floor area of 111,111 sqm. The project company, effective controlled by local shareholder Ren We....