OUE

OUE: 3Q11 results below.
Net profit at $19.8m, -85% yoy, -1.5% qoq, on lower development earnings and higher interest expense. Excluding one-off gains in 3Q10, core net profit would have declined 4.6% yoy.
Revenue grew 69% yoy, underpinned by higher hospitality income and maiden contribution from Crowne Plaza Changi (CPC) and property invmt although gross margin declined sequentially from 62.6% to 58.9%.
Net gearing rose from 47.7% to a high of 55.5% after the completion of the CPC acquisition in July, above mgt's 50% optimal gearing, and could head higher with ongoing share buybacks.
Residential sales (Twinpeaks) remain muted with only 3 units sold in 3Q (49 out of 462 units sold to date, trending below mgt's target) and mgt expects the cooling measures to moderate prices and sales.
Office leasing activity has slowed markedly and occupancy at OUE Bayfront rose marginally from 77.1% in end July to 80.65%, while DBS Building is 90.19% leased, as anchor tenants relocate. One Raffles Place T.2 pre-commitment not officially disclosed, but reportedly at around 34%.
Stock trades at 0.74x P/B, 17x FY12E P/E.
Deutsche maintains Sell with TP of $1.96, pegged to 45% discount to its RNAV estimate.
BOA-ML maintains Buy with TP at $2.70, set a 20% discount to its RNAV estimate.
Credit Suisse maintains Outperform, but slashes TP to $2.93 from $4.20, as it drops its RNAV estimate to $3.66 from $4.67, and lowers the TP discount to 20% from 10% to factor in economic headwinds.