SINGAPORE (Feb 27): OCBC is reiterating its “buy” recommendation on OUE with a $2.28 fair value estimate following the group’s results announcement last Friday.
To recap, the group saw FY17 earnings decline by 31.5% to $98.9 million from $144.4 million in FY16, due to absence of one-off gains and provision for legal and related expenses.
See: OUE reports 31.5% fall in FY17 earnings to $99 mil on provisions and absence of one-off gains
Revenue fell 14.7% y-o-y to $754.1 million, due to the disposal of the extension to Crowne Plaza Changi Airport to OUE Hospitality trust in FY16.
Despite this, analyst Joseph Ng says in a Monday report that various sector tailwinds appear to position OUE favourably for 2018, such as the office space, which CBRE reported that Grade A Core CBD Rents increased q-o-q by 3.3% in 4Q17 to $9.40 psf/month.
In addition, large biennial events are expected to spur demand within the hospitality space, even as the hospitality market continues to absorb additional supply injected in 2H17.
“We believe that management is on the lookout to replenish the group’s Singapore residential landbank, given the completion of sales at OUE Twin Peaks. The group is also positioned to expand into healthcare real estate, through OUE Lippo Healthcare’s growth path,” says Ng, adding that current valuations remain undemanding.
The stock is currently trading at 0.43 times book, which is about 0.7 times one standard deviation below the five-year mean.
As at 12.08pm, shares in OUE are trading 2 cents lower at $1.92 or 26.1 times FY18 book with a dividend yield of 1.6%.
