Sunday, January 19, 2014

OUE Commercial REIT IPO

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OUE Commercial REIT IPO

  • S$0.80/share offer price
  • 866 million shares to be created
    • 433 million: OUE
    • 225 million: cornerstone investors - Wealthy Foundation Holdings, Mr Gordon Tang, Mdm Chen Huaidan, Mr Yang Dehe and RHB Asset Management Sdn Bhd
    • 151.75 million: institutions
    • 56.25 million: retail investors
  • 6.8% 2014 yield forecast, 6.89% 2015 yield forecast (after income support)
  • 23.3% discount to NAV of $1.043/share
  • 41.2% gearing ratio
  • Ba1 (Moody's) rating
  • Prospectus on MAS website click here




  • Operating cashflow (based on FY2012) can provide up to ~6.5% yield without income support. For the first two years, if income support kicks in, payout will still be < 100% of cashflow. Else, expect OUE C-REIT to be paying out of their own pocket until rental yields improve
  • Average P/B value of direct competitors (CapitaCommercial Trust, Frasers Commercial Trust, Keppel REIT, Suntec REIT) is 0.84 based on 14 Jan 2014 OCBC S-REITs tracker. This represents a rough theoretical upside of 10% for current OUE C-REIT P/B of 0.767.
  • OUE Bayfront is a relatively new property with rental yields yet to stabilise. Income from it forms almost 70% of OUE C-REIT portfolio so expect some volatility in that sense. Singapore commercial rentals in the CBD has been improving so rental yields can have room to improve. Leases for Lippo Plaza are mostly due for renewal soon so there is some case for upward improvement in rental yields subject to stability of the property market in China
  • OUE Downtown 2, LA US Bank Tower, One Raffles Place could also be injected into the trust. OUE C-REIT, upon listing, will have a market capitalization of around S$700 million - the smallest of C-REITs on the SGX (next smallest Frasers Commercial Trust has a market cap of S$840 million). Chances are OUE is warming the market to its properties but still unsure of the true demand given the start of US tapering exercise. Slowly, but surely, they will want to inject these properties into the C-REIT to unlock their value.
Overall - BUY OUE C-REIT only for the long run. Expect volatility in prices as US tapering exercise goes into full swing and as OUE C-REIT begins negotiating renewal of rents.

IF YOU ARE UNDECIDEDSG IPO Statistics page will show you how the IPO demand and supply has been from 2012 onwards.

IF YOU WANT TO APPLY, do check out Guide to IPO InvestingThe deadline is Noon 23 Jan! Hurry.

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