What Would Warren Buffett Make Of OUE Limited?

It was formerly known as Overseas Union Enterprise. Today, the company, which is also part of the Lippo Group, is known simply as OUE Limited (SGX: LJ3). It is a property developer that is worth around S$1.5 billion.

But just how attractive is OUE Limited to an investor such as Warren Buffett?

The bottom-lines of property developers can be volatile. OUE is no different. Over the last ten years, the owner of Marina Mandarin has reported a loss of S$37 million and a profit of S$1.1 billion. The average profit since 2004 was S$268 million with a standard deviation of S$440 million.

The wild swings in the Net Income Margins could deter Buffett, who would prefer low earnings volatility. While the median Net Income Margin might be high, it could be the unpredictability that might put him off.

The Sage of Omaha might take exception to the low Asset Turnover too. On average, OUE generated S$7 on every $100 of asset employed in the business. That might not be good enough for Buffett.

OUE does pay a dividend. However, the payouts are not entirely predictable. That could be a sticking point for Buffett, who appreciates both stability and predictability.

But it’s not all bad news for OUE. The company has a reasonably strong balance sheet. It has Total Assets of S$8.09 billion and Total Liabilities of S$3.49 billion. OUE is also currently valued at a 40% discount to its book value, which could be attractive.

UOE has some attributes that Buffett could identify with. Unfortunately, it might not have enough of them.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.