OUE

OUE: 2Q14 results below street expectations, as net profit plunged 70% y/y to $4.4m due to timing of profit recognition from its Twin Peaks residential development. Revenue slipped 11% to $100.2m, following the disposal of two China hotels (in 3Q13), though partially offset by higher rental property income from Lippo Plaza (acquired by OUE Commercial REIT in Jan ’14) and US Bank Tower (acquired in Jun ’13). In addition, OUE Hospitality Trust was deconsolidated in 1Q14, and is now an associate of OUE. Accordingly, OUE’s associate contributions jumped to $12.2m from $4.6m a year ago. Balance sheet remains firm with a cash balance S$449m post repayment of debt of S$385m and net gearing of 37.4%. Management maintained an interim DPS of 1¢ (excluding 1H13 special DPS of 20¢). The key catalyst for OUE will be the redeployment of capital, such as its JV in South Korea. Valuations remain attractive at a 40% discount to Deutsche's RNAV of $4.06 and 0.60x P/B. Latest broker recommendations: Deutsche maintains Buy with TP of $2.64