OUE

OUE: Reported strong set of 3Q10 results, with Rev at $51.2m, +52.9%YoY and flat QoQ, while Net Profit was at $127.1m, over 16 times vs YoY and 7 times QoQ, spurred largely by a fair value gain of $128.4m, mainly frm its recent acquisition of DBS Towers 1&2. Removing revaluation gains would see core operations Net profit at $24.6m, +18% vs Consensus estimates and +215.4%YoY and +47.3%QoQ....

Robust performance attributed to improved contributions frm grp’s hospitality and retail division. Hospitality division saw rev of $42.4m, +29.3%YoY against an improved global economic outlook and record tourist arrivals, while retail division helmed by grp’s wholly owned Mandarin Gallery, with rental income reaching $8.2m in 3Q10...

Going forward, grp expects DBS towers 1&2 to contribute positively to its commercial division from 4Q onwards, and expects contributions from its Twin peaks project and the completion of 50 Collyer Quay and Change Alley Plaza early nxt yr....

We note that grp’s balance sheet remains strong with a net cash position of $193.5m, with the ability to increase its debt capacity by another $1-1.5b to take on net assets, while at current price, price trades at 1.43x current P/B and 0.78x P/RNAV, as the office sector continues to recover and capital values expected to trend higher….