OUE

OUE: Core earnings broadly in-line. Grp reported 4Q net profit of $21.7m, -69% YoY and FY12 net profit of $90.1m, -76% YoY. Excluding net fair value loss of $11.7m (mainly due to One Raffles Place of –$41m), FY12 core net profit of $102m (+11% YoY) would have been broadly in line with consensus. Grp’s hotel portfolio was revalued up by 5% with Mandarin Gallery +4%. Rev growth was broad-based; driven by hospitality (+11% YoY) on full yr contribution from CPCA (Crowne Plaza Changi), making up 57% of FY12 revenue. Investment property rev rose 35% underpinned by higher occupancy rate at OUE Bayfront and a one-off penalty on DBS Blg. Occupancy at OUE Bayfront has increased from 88% to 93.2% and mgt comments that it is seeing strong interest from MNCs for DBS Blg (renamed 6 Shenton Way), although backfilling progress was not disclosed. Sales at Twin Peaks have improved with 7 units sold in 4Q (13% of total 462 units sold to date). Going forward, grp will review its marketing strategy for Twin Peaks in view of the latest cooling measures and will focus on active lease mgmt. While hotel occupancy remains strong, global uncertainty and slowdown in visitor arrivals could weigh on demand. Mgmt will also proceed with plans to redevelop the retail podium of 6 Shenton and ORP, as well as more rooms on the adjoining site of CPCA. At current price, grp trades at 0.8x P/B and 0.7x P/RNAV, the grp has declared a final div of 3c & a special div of 5ct, bringing FY12 div to a better than-expected 11c (vs. 13c in FY11) implying slightly under 4% yield. Net gearing rose marginally from 61% to 62%. Ratings as follow: Deutsche maintains Buy with $3.32 TP UOB Kay Hian maintains Buy with $3.30 TP