OUE reported that its 1Q16 PATMI declined 89.3% YoY to S$8.3m mainly due to fair value losses from the mark-to-market of investments and the absence of a one-time gain from the sale of Crowne Plaza Changi Airport which was booked in 1Q15.

That said, we saw the group’s 1Q16 revenues clocked a marginal 13.4% YoY increase to S$122.5m mostly due to higher contributions from the group’s investment division, which consolidated revenues of One Raffles Place after additional interests in OUB Centre Limited were acquired in Oct 15, and also marginally higher revenues from the hospitality operations (up 3.0% YoY to S$51.7m in 1Q16), but these were partially offset by lower contributions from the property development division.

1Q16 PATMI constitutes only 13.1% of our FY16 forecast; we judge these results to be a miss versus expectations and will look to lowering our forecasts ahead. We put our fair value estimate of S$2.69 under review but maintain a BUY rating on the stock.

Source: OCBC Research - 12 May 2016