OUE

OUE: Maybank KE initiated with a BUY with TP of $3.57, based on a 30% discount to house's end-2013 RNAV/ share. MBKE see the floating of a hospitality REIT as a near-term catalyst for OUE, with Mandarin Gallery and Mandarin Orchard being the first two assets to be injected into the initial portfolio at $1.8b with effective cap rates of 5.2-5.4%, which will garner DPU yields of 5.3-6.7%. OUE stands to collect ~$800m in cash from spinning off its assets into a REIT, providing it with ammunition for future acquisitions, with management having set sights on the US and China. With a presence in the hospitality, office, retail and high-end residential segments, OUE is an almost pure play on the Singapore property sector. OUE owns prime office buildings in the Singapore CBD. OUE Bayfront and One Raffles Place. Rental reversions could come from DBS towers 1 and 2 following DBS Bank’s shift to MBFC Tower Three. DBS Bank used to pay $4.90 psf/mth compared with the current rental of $6.18 psf/mth.