OUE

OUE: Announced 1Q12 results which were below expectations. Rev at $97.2m, +42.4% yoy and net profit at $21.7m, -92% yoy, while Gross margins at 60.4% was flat yoy. Increase in Grp’s total rev was due to higher rev reported by the Hospitality division, which saw a total rev of $60.6m vs (1Q 11: $45.2m) due to contribution from Crown Plaza Changi Airport (CACA) acquired in Jul11 and better performance by the other owned hotels contributed to the increase in revenue. Meanwhile grp’s Property Investment division saw rev from investment properties amounted to $33.3m for 1Q12 vs (1Q11: $22.5m) mainly due to contribution from OUE Bayfront where occupancy rate has increased vs 2011, while development property income of $3.2m in 1Q12 relates to rev recognised from the sale of residential units for Twin Peaks. Grp’s bottom-line was however impacted by higher finance costs, which rose more then 100% to $18.4m, due to increased borrowings in the current qtr, while admin exspenses also rose due to the inclusion of CPCA Going forward, grp remains confident of SG’s long-term prospects and will continue to enhance the value of its portfolio through strategic acquisitions and asset enhancements. Grp’s overall fundamentals remain fairly strong, although net gearing is a tad high at 56.3%, and at current price, grp trades at 0.67x P/B. Ratings as follow: Deutsche maintains Hold with $2.55 TP JP Morgan maintains Neutral with $2.70 TP UOB Kay Hian maintains Buy with $2.90 TP