Wednesday, 19 March 2014

Overseas Union Enterprise

UOBKayhian on 19 Mar 2014

FY14F EV/EBITDA (x):44.2
FY15F EV/EBITDA (x):38.7

Charging into Korea with Caesars. OUE has announced that a consortium comprising OUE, Lippo Limited and Caesars Entertainment Corporation (Caesars) has been granted pre-approval by the Korea Ministry of Culture, Sports and Tourism to develop the first internationally-branded integrated entertainment resort project in Incheon, South Korea. The project will also feature a foreigners-only casino, which will be operated by Caesars. S$1b (KRW855b) investment for Phase 1 of the project with a total GFA of 150,000 sqm comprising hotel, retail, convention and residential properties on a 4.3-ha plot of land. Phase 1 of the project is expected to be completed by early-18, in time for the Winter Olympics in Pyeongchang, South Korea. OUE has indicated that its participation will focus on the hotel component and convention centre of the project. Total investment for the project could reach KRW2.3t (S$2.7b) which is planned to be built over several phases.

Maintain BUY with a reduced target price of S$2.80, pegged at a 30% discount to our lowered RNAV of S$4.02/ share (from S$4.34) mainly adjusting for the special dividend. OUE is trading at a deep 41% discount to its RNAV. OUE had announced a 1-for-6 distribution-in-specie of OUE Hospitality Trust (OUE H-Trust) (equivalent to 14.8 S cents dividend) following the divestment of OUE Bayfront to OUE Commercial REIT. OUE will retain 34% of OUE H-Trust post divestment, down from 45% currently. In addition, OUE also announced a final cash dividend of 2 S cents/share, bringing total cash dividend for 2013 to 23 S cents/share. Books closure is on 20 March, with the crediting by 31 March.

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