OUE's gains surge 19.7% to S$23.8m

Its property investments are good cash cows.

According to a release, OUE net profit grows 19.7% in 3Q2012 to S$23.8 million.

SGX Mainboard-listed integrated property developer Overseas Union Enterprise Limited reported a net profit of S$23.8 million on the back of S$102.0 million in revenues for its third quarter ended 30 September 2012. Profit before finance expenses and share of results of associates surged an impressive 27.1% to S$43.6 million.

On a nine-month basis, the Group posted S$68.3 million in net profit against revenues of S$295.9 million.

During the quarter under review, the Group’s revenue from property investments totalled up to S$37.9 million, a 40.0% jump from S$27.0 million in 3Q2011. This strong surge in revenue was due to rental contributions from OUE Bayfront, the Group’s flagship commercial development where occupancy rate had increased year-on-year, and a one-off penalty rent received in relation to another commercial building.

In 3Q2012, the hospitality division recorded a total revenue of S$58.2 million, as compared to S$57.0 million in the same quarter a year ago. The increase was mainly contributed by Crowne Plaza Changi Airport (“CPCA”) which was acquired in July 2011.

The Group’s property development arm continued to sell more residential units at Twin Peaks, a luxurious condominium project located at Leonie Hill Road, which has more than doubled its income to S$5.9 million in 3Q2012.

Commenting on the Group’s performance in 3Q2012, OUE’s Executive Chairman, Dr Stephen Riady said, “3Q2012 was yet another quarter of steady financial growth for OUE, both in terms of top and bottom lines. We continue to benefit from our well diversified portfolio of strategically located prime assets, coupled with our asset enhancement and active leasing management strategy.”

Based on figures from the Ministry of Trade and Industry, the Singapore economy grew at a modest pace of 1.3% year-on-year in 3Q2012, as compared to 2.3% growth in the previous quarter. Looking ahead, the uncertainty in the global economy is expected to soften growth for the rest of 2012. Echoing this shift, Singapore’s hospitality sector may close the year on a weakened note, although overall occupancy is expected to remain at healthy levels buoyed by the island’s continued appeal to travellers in the region, particularly as a destination for meetings, incentive travel, conventions, and exhibitions.

Demand in office space market in Singapore was strong in 3Q2012 and office vacancy rate in the core Central Business District (“CBD”) fell to 6.8% (from 7.7% in the same period last year), according to CB Richard Ellis (“CBRE”). Despite the strong showing, CBRE expects CBD vacancy rates to rise as a high volume of second hand office space is expected to enter the market, adding pressure to rental rates. On the retail space front, average retail rents across all sub-markets remained stable in 3Q2012, with prime Orchard Road rent maintained at S$31.60 psf/month.

To date, lease commitments for OUE Bayfront stand close to 88% of net lettable area. One Raffles Place Tower 2 was officially launched in September 2012, contributing another 350,000 sq ft of prime office space and bringing the total office space provided at One Raffles Place to 860,000 sq ft. As DBS Towers’ major tenant gradually vacates the premises, the Group is seizing the opportunity to secure new leases at higher rental rates to maximise returns from these assets.

As for the residential property market, another round of cooling measures was recently introduced by the Government to curb speculation. These may deter marginal property buyers. Nonetheless, the Group will continue to drives sales of its residential project, Twin Peaks.

“We remain confident of Singapore’s competitive advantages as a key tourist destination and strategic hub for global businesses. We are forging ahead with our plans to redevelop the DBS Building podium, the retail podium at One Raffles Place as well as the adjoining site of Crowne Plaza Changi Airport. These asset enhancements will increase and diversify our income when completed. We are also actively pursuing other investment opportunities which would enhance and complement our business strategy,” added Dr Riady.