OUE third-quarter PATMI disappoints with 44% drop to S$13.4m

Due partly to ballooning borrowing costs.

OUE reported lower-than-expected 3Q13 net profit of SGD13.4m, down 8% QoQ and down 44% YoY, due mainly to higher borrowing costs as well as a SGD5m loss from the sale of its two hotels in China, reported Maybank Kim Eng.

9M13 PATMI fell short, coming in at just 33% of the research firm's full-year estimate, as borrowing costs surged from fair value loss on derivatives and other OPEX also increased on higher legal and professional fees incurred in the listing of OUE Hospitality Trust.

OUE is looking to spin off a commercial REIT in 2014 with OUE Bayfront as one of two seed assets, said Maybank.

"While we see this positively as it will strengthen OUE’s fund management business and raise the probability of bumper dividends in FY14, we will also keenly watch how OUE will redeploy the balance of the proceeds."