• FY15 results broadly in line
• Focused on AEI and lease management
• Final cash dividend of 1.0 S-cents

FY15 PATMI down due to absence of divestment gains

OUE reported that its FY15 PATMI decreased 85.7% to S$156.4m mostly due to the absence of divestment profits from the sale of Mandarin Orchard Singapore and Mandarin Gallery to OUE Hospitality Trust in FY14; partially offset by an increase in the share of results of equityaccounted investees, given a S$143.4m of negative goodwill recognized for the acquisition of shares in Gemdale Properties in FY15.

In terms of the topline, FY15 revenues rose 3.6% to S$431.5m given higher contributions from the group’s property investment division (up S$35.6m to S$193.4m in FY15) while revenues from the hospitality division remained relatively stable (S$204.4m) and property development revenues (solely from the group’s sole residential development, Twin Peaks) dipped over FY15.

Accounting for one-time gains and extra-ordinary items, we judge FY15 results to be broadly within expectations. A final dividend of 1.0 S-cent was proposed; including the interim dividend paid earlier in the year, this brings the total cash dividend for FY15 to 5.0 S-cents.

Increased stake in OUE C-REIT to 65%

We understand that management remains focused on asset enhancement initiatives and active lease management at OUE Downtown and US Bank Tower. Asset enhancement works at OUE Downtown is expected to complete by end 2016 and the committed office occupancy rate is currently 91.0%.

At the US Bank Tower, the commercial office space has an occupancy rate of about 74.7%. In addition, the 10-storey extension at Crowne Plaza Changi Airport recently passed its half-way mark and is on track to complete in Jun 2016.

The group also recently increased its stake in OUE C-REIT to 65.0%, purchasing 203.1m shares for approximately S$0.817 per share (~14% discount to net tangible asset value per units as at end Dec 2015), which will allow OUE to participate in the trust’s regular and growing distributable income.

We update our valuation model for higher discount rates and softer ASPs, and our fair value estimate dips from S$2.69 to S$2.32. Maintain BUY.

Source: OCBC Research - 24 Feb 2016