1Q15 PATMI fell 91.8% YoY to S$77.2m mainly due to the absence of divestment gains from the sale of Mandarin Orchard Singapore and Mandarin Gallery to OUE H-REIT recognized in the same quarter last year, partially offset by a S$57.8m gain on the sale of Crowne Plaza Changi Airport to OUE H-REIT in 1Q15. We judge these results to be within expectations; adjusted for one-time gains, 1Q15 core PATMI and revenues constitute 18.8% and 24.7% of our full-year forecast, respectively. The group remains focused on asset enhancement initiatives and active lease management at OUE Downtown and US Bank Tower, which has achieved committed occupancy rates of 89.7% and 79.6%, respectively. The extension to Crowne Plaza Changi Airport is expected to be completed by end of 2015 (and no later than June 2016) and will be divested to OUE H-REIT subsequently as part of the group’s capital recycling strategy. Maintain BUY with an unchanged fair value estimate of S$2.69 (20% discount to RNAV).
1Q15 PATMI down YoY due to absence of one-time gains
1Q15 PATMI fell 91.8% YoY to S$77.2m mainly due to the absence of divestment gains from the sale of Mandarin Orchard Singapore and Mandarin Gallery to OUE H-REIT recognized in the same quarter last year, partially offset by a S$57.8m gain on the sale of Crowne Plaza Changi Airport to OUE H-REIT in 1Q15. 1Q15 revenue was mostly stable – up 1.0% YoY to S$108.0m – as the group received higher contributions from Lippo Plaza, US Bank Tower and OUE Twin Peaks over the quarter. That said, we note that gross margins dipped from 56.5% in 1Q14 to 37.4% this quarter due to higher operating costs and recognition of rental expenses of OUE H-TRUST. We judge these results to be within expectations; adjusted for one-time gains, 1Q15 core PATMI and revenues constitute 18.8% and 24.7% of our full-year forecast, respectively.
Asset enhancement initiatives bearing fruit
The group remains focused on asset enhancement initiatives and active lease management at OUE Downtown and US Bank Tower, which has achieved committed occupancy rates of 89.7% and 79.6%, respectively. The 10-storey extension (CPEX) to Crowne Plaza Changi Airport is expected to be completed by end of 2015 (and no later than June 2016) and will add 243 guestrooms to the development for a total of 563 rooms. Management has indicated that the extension will be subsequently divested to OUE H-REIT in line with the group’s capital recycling strategy. Finally, while the domestic high-end residential segment remains subdued, OUE will seek to drive sales at its OUE Twin Peaks project. As at end 1Q15, the group continues to enjoy a firm balance sheet with a net gearing of 40.9% and S$265.2m in cash. Maintain BUY with an unchanged fair value estimate of S$2.69.
1Q15 PATMI fell 91.8% YoY to S$77.2m mainly due to the absence of divestment gains from the sale of Mandarin Orchard Singapore and Mandarin Gallery to OUE H-REIT recognized in the same quarter last year, partially offset by a S$57.8m gain on the sale of Crowne Plaza Changi Airport to OUE H-REIT in 1Q15. 1Q15 revenue was mostly stable – up 1.0% YoY to S$108.0m – as the group received higher contributions from Lippo Plaza, US Bank Tower and OUE Twin Peaks over the quarter. That said, we note that gross margins dipped from 56.5% in 1Q14 to 37.4% this quarter due to higher operating costs and recognition of rental expenses of OUE H-TRUST. We judge these results to be within expectations; adjusted for one-time gains, 1Q15 core PATMI and revenues constitute 18.8% and 24.7% of our full-year forecast, respectively.
Asset enhancement initiatives bearing fruit
The group remains focused on asset enhancement initiatives and active lease management at OUE Downtown and US Bank Tower, which has achieved committed occupancy rates of 89.7% and 79.6%, respectively. The 10-storey extension (CPEX) to Crowne Plaza Changi Airport is expected to be completed by end of 2015 (and no later than June 2016) and will add 243 guestrooms to the development for a total of 563 rooms. Management has indicated that the extension will be subsequently divested to OUE H-REIT in line with the group’s capital recycling strategy. Finally, while the domestic high-end residential segment remains subdued, OUE will seek to drive sales at its OUE Twin Peaks project. As at end 1Q15, the group continues to enjoy a firm balance sheet with a net gearing of 40.9% and S$265.2m in cash. Maintain BUY with an unchanged fair value estimate of S$2.69.
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