OUE

OUE: Channel NewsAsia says OUE will be developing a 5-storey, 170k sf retail mall at the existing DBS Building at Shenton Way. OUE had acquired the property in 2010 for ~$871m and is expected to spend over $100m on the redevelopment, which is likely to see the two existing office towers remain, while the podium level is converted to a retail mall. Property consultant HSR expects rents to average $13-16 psfpm, supported by the new residential and hotel devts in the vicinity. OUE is also looking to refurbish the mall at One Raffles Place, and renovation is expected to cost over $40m. StanChart continues to believe OUE is close to selling its Mandarin Orchard hotel for ~$1.2b (OUE has $2.3b market cap), which could see the co book divestment gains of $1.20/sh. OUE paid out 100% of its net profit ex-revaluationss to shareholders in FY11 by way of a $0.13/sh dividend. StanChart believes they could potentially pay out a portion of such a divestment gain as dividend this year. The house reiterates its High Conviction call on OUE (Outperform, TP $3.22), premised on its view that developers could Re-rate on asset sales.