OUE potential 14% Special Dividend Payout

OUE is a real estate owner, developer and operator with diversified asset exposure to prime office, hotel, retail and residential segments

A special 1-for-6 distribution-in-specie of OUE H-Trust (or S$0.15 dividend and 6.3% yield) is in sight following the listing of OUE C-REIT. A further 8% dividend payout is a possibility following the example of OUE HT. OUE has established a capital recycling platform to enable the parent to focus on higher-value development activities while simultaneously deriving a stable income stream through its stakes in its trusts and property management platform. Maintain BUY with a lower target price of S$3.04 (from S$3.12), based on a 30% discount to our revised RNAV of S$4.34/share (post 21 cent dividend).

WHAT'S NEW
 • Successful listing of OUE Commercial REIT (OUE C-REIT) with the REIT closing yesterday at S$0.80, unchanged from the IPO price.

STOCK IMPACT
• 6.3% special dividend in sight. OUE has announced a
one-for-six distribution in specie of OUE Hospitality Trust (OUE H-Trust), equivalent to S$0.15 dividend or 6.3% yield, contingent on the divestment of OUE Bayfront to OUE Commercial REIT. OUE will retain 33-35% of OUE H-Trust post divestment, down from 45% currently. With the successful divestment and listing, OUE will likely announce the special dividend within the next quarter.

• 4.2% special cash dividend a possibility. OUE could also announce a further special cash dividend of close to S$0.10/share (or 4.2% yield) assuming it distributes 45% of its net cash proceeds from the IPO, following the potential full repayment of existing debt of US$376.6m. This is similar to the special dividend post-listing of OUE Hospitality Trust.

• Another 3-4% yield from potential distribution-in-specie of OUE C-REIT units. In addition, similar to the distribution-in-specie of OUE H-Trust units, OUE may also choose to distribute OUE C-REIT units to enable shareholders to benefit from the ownership and returns from the separate entities. A distribution-in-specie to reduce OUE's current 45- 50% stake in OUE C-REIT to a 35% stake could yield a further 3-4% yield. This distribution is unlikely in the near term due to the six-month lock-up for OUE C-REIT, but could be a medium-term catalyst for OUE.