OUE

OUE: SCB note that OUE could become SG’s largest listed landlord and residential developer if it successfully acquires F&N. See F&N’s $8.7bn property portfolio as complementary to OUE. Residential development makes up 47% of F&N’s property value and 78% of FY11’s pty EBIT. F&N is the largest listed residential developer by mkt share and manages 2 SREITs with $4b of commercial assets. OUE currently lacks these areas of expertise. OUE’s strength lies in SG prime office portfolio, which makes up 54% of the co’s $6.4bn portfolio. With SG assets making up 73% of its potentially enlarged portfolio, OUE's investors may then see it as the key proxy for SG property. Its discount to RNAV could then narrow from the current 45%. CDL and CAPL are at 15% and 20% discounts to RNAV. After the potential sale of Mandarin Orchard and Orchard gallery and taking on some debt, OUE could then have 2b to invest in F&N. However, this would still be insufficient. OUE’s low free float and steep discount to NAV makes equity issuance a challenge.