Thursday, November 22, 2012

OUE's value will enhance with F&N deal: analysts

SINGAPORE: Analysts said hotel and property group Overseas Union Enterprise (OUE) can become one of the key players in the real estate industry in Singapore if it manages to snare Fraser and Neave (F&N).

They believe the acquisition can open up avenues for OUE to unlock the value of its assets.

A consortium led by OUE has placed a bid of S$13.1 billion for F&N, countering an earlier offer from a Thai investor.

The fate of F&N -- a takeover target of TCC Assets and OUE -- remains unclear for now.

But should OUE win the takeover tussle, analysts say the tie-up will provide "a lot of synergy" for OUE to grow its property business via F&N's fully-owned subsidiary Frasers Centrepoint Limited (FCL).

FCL's portfolio comprises shopping malls, serviced apartments and residential homes, industrial property, and asset management.

Liu Jinshu, deputy lead analyst at SIAS Research said: "F&N's property business actually has a sizable residential component whereas OUE seems to be more focused on the commercial and hospitality side of the industry.

"Buying into a proven team of residential home developers is a less risky way to enter the segment or to get big in the segment in a quick way."

OUE's commercial assets in Singapore include One Raffles Place, DBS Towers 1 and 2 and OUE Bayfront.

Some market watchers say it is possible for OUE to divest these prime office properties into Frasers Commercial Trust, which will boost the value of assets in the Real Estate Investment Trust (REIT).

Meanwhile, OUE also owns two hotels in Singapore, including the Mandarin Orchard and Marina Mandarin.

Ku Swee Yong, CEO of International Property Advisor said: "There is also an opportunity for OUE with its branded flagship asset in Orchard Road, Mandarin Hotel, being able to probably merge or be bundled together with Frasers Hospitality's suite of assets and then spin off a new hospitality trust.

"I believe there could be a lot of value enhancement with the merger."

Acquiring Frasers Centrepoint, which has assets in China and Australia would also allow OUE to expand its overseas presence.

Some analysts said should the deal go through and OUE pockets F&N's property business, that could place them among the top five players in the property market in Singapore, alongside companies like CapitaLand, City Developments Limited and Keppel Land.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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