I don’t find OUE C offer compelling

REIT 1 Minute

I am vested in both OUE Commercial Trust (OUE C) and OUE Hospitality Trust (OUE H)

But I am not taking up the offer by OUE C for OUE H as I don’t find the offer by the former compelling at all.

First, it is not a cash buyout. I ended up holding more OUE C units, which I am already very exposed.

Second, OUE C is not paying any premium over the OUE H’s latest Net Asset Value of 75 cents. Based on OUE C last traded price of 52 cents, it is only valuing OUE H at 52*1.3583 + 4.075 = 74.7 cents, which in fact is below that of the latest NAV.

Third, I don’t really see any major synergy between OUE C and OUE H. They are in different asset classes and are exposed to different risks and value drivers. I think it will require a different skill set to manage a hospitality business well. I feel by merging OUE H with OUE C, it would only dilute the future focus and management attention on OUE H and it is not beneficial to both set of shareholders.

Actually I struggle to see how the deal can be yield accretive. In their joint announcement, they mentioned that it would be value accretive but did not said that it would be YIELD accretive. As an investor of REIT, I am very much interested in the yield.

I am sad and disappointed to get another “shock” from OUE C within such a short time … maybe it is time to rethink my holding in OUE C and OUE H. I wonder how much importance they place on the interest of the minority shareholders. 😦

Regards,

Warriortan

 

Published

4 thoughts on “I don’t find OUE C offer compelling”

  1. Totally agree with what you said. This deal has zero sygnergy and the investment rationale makes zero sense (i.e. listing on index, lower cost of debt etc bullshit) . Although dpu-wise it may be accretive to OUE CT, but we are now looking at different combined asset profile now.

    Btw a small comment, the way u calculative the offer price may not be correct; it is 1.3458 times the new reit value, not the old reit value of 0.52. But aiya it doesnt really matter.

    Liked by 1 person

    Reply

  2. For a while, I was tempted to take a stake in OUE CT, but didnt because I didnt like their building portfolio, and I had too many reits. Through the two episodes for OUE CT, I have lost more faith in OUE management though to be honest.

    Liked by 1 person

    Reply

Leave a comment