OUE Commercial REIT - Respectable performance despite sector headwinds
- OUE Commercial REIT (OUECT) reported that 4Q16 amount available for distribution and distribution per unit (DPU) decreased 12.5% YoY and 13.2% YoY to S$15.4m and 1.18 S-cents, respectively, mostly due to lower income support at OUE Bayfront and higher net finance costs.
- Despite this, we note that 4Q16 revenues increased 11.6% YoY to S$45.0m mainly due to contributions from One Raffles Place and 4Q16 NPI similarly improved 17.3% YoY to S$34.8m.
- The trust’s portfolio occupancy remained at a healthy 94.8% as at end 4Q16 (versus 94.4% last quarter) but due to challenging conditions in the domestic office sector, management highlighted negative office rental reversions for OUE Bayfront and One Raffles Place at -10.1% and -3.0%, respectively.
- Overall, we judge these results to be broadly within expectations.
- Note that OUECT pays its distribution semi-annually and the book closure date for 2H16 DPU (2.50 Scents) is 6 Feb 2017, with payment of the distribution to be expected on 28 Feb 2017.
- Maintain HOLD on OUECT with an unchanged fair value estimate of S$0.65.