OUE-CT

OUE-CT: CLSA initiates with Outperform and TP $0.84 (note that upside is only 4% despite the rating). OUECT currently has two assets: OUE Bayfront Singapore, a Prime Grade A office building in core CBD completed in 2011 and Lippo Plaza Shanghai, a grade A office building in the traditional CBD. Key investment theses: 1. Shackles of in-place rents prevent office rent recovery from accruing to unitholders for now, but may turn beneficial when supply floods in 2016/17. 2. Steep discount unwarranted, the stock trades at 0.79x P/BV and 6.8% forward yield relative to peers' 1.00 P/BV and 5.5% forward yield 3. Accretive acquisitions in place, specifically One Raffles Place in 2015 and OUE Downtown in 2016. No.3 should be catalytic on the stock. Risks include high gearing (~39.8%), FX risks and interest rates risks.