OUE Commercial REIT IPO

Previous post: [6 Week Temporary Debt Limit Increase]

OUE Commercial REIT IPO

Summary

• 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

Timeline

-->

Commentary

• 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 UNDECIDED, SG 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 Investing. The deadline is Noon 23 Jan! Hurry.

Lastly, do follow HealthyTrading on Twitter! We are live on Twitter! Follow to get updated financial news with a Singapore perspective for your investment and trading ideas.

-->

Large Caps Gain Steam - SGX, Semb Corp

[Previous post: Mixed Fortunes of Oil & Gas - Ezra, Swissco]

Large Caps Gain Steam

1. SGX (financial services)
SGX 2Q profit grew to $76 million on the back of increased daily average traded volume. This 16.7% increase in quarter profit reflects the resilience and rebound of Singapore's key market place and the work SGX has been putting into attracting more securities and derivatives trades.

• Price broke out last week above $7.20. Even stronger buying pressure ensued in the first half of this week with yet another big white candlestick with an open at the same levels as last week's close. Very bullish situation.
• MACD - is trending upwards is increased positive divergence.
• RSI (25w) - heading towards 70% levels with some leeway to go before overbought status.
• Long with TP - $$7.80 (-2% from current levels) in the near term (1-2weeks). If buying pressure still persists, expect the stock to breakout to the next support level at $8.60 which translates to almost a 10% gain from Wednesday close price. Prepare to provide 6-8 weeks for $7.80 resistance to be broken as that is roughly the same time period between May to Aug 2011 where the stock tumbled through the price region.

2. SembCorp (Oil & Gas; Utilities; Env Management)

• Prices appear steadily appreciating towards $5.70. In a stealth rally, Semb Corp has almost risen $0.60 since Nov 2012. Volumes are still thin but that is the surprise of the move since 2 months ago. Large white bullish candlestick currently formed this week.
• MACD - MACD crossed into the positive territory this week. Positive divergence showing good pace.
• RSI (25w) -RSI climbing steadily but slowly and managed to ease past 50% already.
• Long with TP - $$5.70 (~5% from current levels) over 2-3 weeks. No reason for prices to remain resisted at current levels. Expect trend to continue upwards in the absence of company/industry news.