- One Raffles Place mall reopened after a major revamp, with new tenants such as H&M and UNIQLO.
- Works continue at OUE Downtown and Downtown Gallery, which could be recycled for capital into OUE Hospitality Trust (OUEHT) and OUE C-REIT by 2017.
- Incorporating our TP for recently-initiated OUEHT and adjustments for the distribution in specie, we trim our TP to SGD2.80, pegged to a 35% discount to RNAV. Maintain BUY.
One Raffles Place (ORP) mall - the largest mall in Raffles Place - has 98,500 sq ft of NLA with H&M and UNIQLO among its tenants. We estimate that ~70% of the stores are in operation. Based on management’s estimates, OUE’s 41% stake in ORP (including Towers 1 & 2) may be ready for injection into OUE C-REIT by 2015. The next focus will be the conversion works at OUE Downtown, where ~264,794 sq ft of office space at Tower 1 is being converted into serviced apartments. The podium is in the process of being converted into a 159,307 sq ft retail mall called Downtown Gallery. With the conversion works expected to be completed by 2016, the serviced apartments may then be injected into OUE Hospitality Trust (OUEHT), while the remaining office space and Downtown Gallery are expected be divested to C-REIT.
Model updated; TP trimmed to SGD2.80
We adjust our model for the deconsolidation of OUEHT following its distribution in specie and incorporate the expected conversion of OUE Downtown to derive a TP of SGD2.80, pegged to a 35% discount to RNAV. Due to the deconsolidation, our FY14E-16E EPS forecasts are cut by 12.6%, 9.4% and 6.3% respectively. Further upside is possible pending more details of the Incheon integrated resort JV with Caesars Entertainment. Maintain BUY.
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