OUE

OUE: Announced 2Q11 results, which was in-line.
Rev at $72.3m, +39.8% yoy and +5.9% qoq, while core net profit at $20.1m, +20.5% yoy and -2.9% qoq.

Almost flat rev qoq, due to lower income from OUE Bayfront (OUEB) and delays in the sale completion of Crowne Plaza (CP). OUEB is now 77% leased while sale of CP only recently completed. Going forward, grp expects more income to come from OUEB and Crowne Plaza, with BOA-ML, the anchor tenant of OUEB, moving in by 1Q12, while new tenants recently signed up for the office block include Hogan Lovells (law firm) and UBP (Swiss bank), lifting pre-commitments from 68% to 77%. No income from CP was booked in 2Q11 as the acquisition was only officially completed on 25 Jul, three months longer than expected.

Mandarin Orchard continued to do well, with rev for hotel +7% yoy, as RevPAR inched up 3% yoy to $233. Occupancy is believed to be 82-85%. OUE plans to expand average day rates beyond $300 by end-2011. Grp has proposed an interim dividend of 2c. Mgt was previously committed to a payout of at least 50% every yr.

At current price, valuations appear compelling, with grp trading at 0.9x P/B vs Keppel Land of 1.3x and UOL of 0.8x, while estimated RNAV at $4.63, suggest a 38% premium discount to stock and further upside. Net gearing at 53.7% however does appear to be on the higher side. CIMB maintains O/p with $3.93 TP. DMG maintain Buy, TP $4.03, JP Morgan retain Neutral, TP $3.40 and CS maintain O/p, TP $4.20.