• FY16 results in line
• Healthy sales at OUE Twin Peaks
• Expanding into healthcare RE

FY16 results mostly within expectations

OUE reported that its FY16 PATMI dipped 7.7% YoY to S$144.4m mainly due to lower share of results of equity-accounted investees and higher finance expenses, partially offset by reversal of impairment losses on OUE Twin Peaks. In terms of the topline, however, we saw a jump from S$431.5m to S$884.2 in FY16 mostly because of strong contributions from both the Property Investment and Property Development divisions.

FY16 revenues from the Property Investment division increased 36.9% primarily due to the full year consolidation of One Raffles Place while the boost from the Property Development division was attributed to healthy sales at OUE Twin Peaks. OUE’s FY16 revenues also included contributions from the divestment of Crowne Plaza Changi Airport Extension to its hospitality REIT (OUE-HT) in Aug 2016.

Accounting for onetime items, we judge this quarter’s numbers to be broadly in line with expectations. The group has proposed a final cash dividend of 2.0 S-cents per share, which brings the total cash dividend for FY16 to 5.0 S-cents per share.

Expanding into healthcare real estate with IHC offer

Management reports that the asset enhancement at OUE Downtown is expected to be completed in 2Q17, with the office component of the project enjoying a fairly healthy occupancy rate of 86.9% despite ongoing enhancements works. In addition, as at end FY16, due to active marketing efforts, a total of 384 units (out of 462 units) at OUE Twin Peaks have been sold. The group’s balance sheet remains healthy with cash and equivalents of S$239.0m and a net gearing of 57.3%, and management continues to actively seek opportunistic acquisitions.

OUE recently launched a mandatory unconditional cash offer for International Healthway Corporation Ltd (IHC) at S$0.106 per share. The group currently owns a 57.6% aggregate stake in IHC, which makes its offer unconditional, and management intends to expand into healthcare real estate which will be a strategic fit to its existing asset portfolio. Maintain BUY with an unchanged fair value estimate of S$2.17.

Source: OCBC Research - 20 Feb 2017