OCBC Securities 2015-08-14: OUE Hospitality Trust - 2Q15; Subdued set of results. Maintain HOLD.


Subdued set of results 

 2Q15 DPU dipped 7.3% YoY 
 Impacted by weaker sentiment 
 Cut forecasts and maintain HOLD 

2Q15 results missed our expectations 

  • OUE Hospitality Trust (OUEHT) reported a muted set of 2Q15 results which fell short of our expectations. Gross revenue and NPI grew 4.6% and 2.2% YoY to S$29.6m and S$25.8m, respectively, bolstered by contribution from Crowne Plaza Changi Airport Hotel (CPCA), which was acquired on 30 Jan this year. 
  • Excluding this, we estimate that OUEHT’s gross revenue and NPI would have fallen 8.5% and 10.1% YoY, respectively. DPU experienced a decline of 7.3% to 1.52 S cents, attributed largely to a jump in finance expenses from S$3.7m to S$6.0m. 
  • For 1H15, OUEHT’s gross revenue rose 3.4% to S$58.9m and formed 46.9% of our FY15 forecast. DPU of 3.13 S cents represented a dip of 5.7% and constituted 46.4% of our full-year projection. 

RevPAR figures reflect challenging conditions 

  • The headwinds facing Singapore’s hospitality industry has manifested in a YoY decline in RevPAR for OUEHT’s Mandarin Orchard Singapore Hotel (MOS) by 9.9% to S$218. This was also slightly lower than the S$223 figure recorded in 1Q15. 
  • Similarly, CPCA’s RevPAR was lower by 6.1% to S$231 on a QoQ basis. The weaker tourism sentiment, relatively strong SGD and absence of the Food and Hotel Asia conference this year has resulted in sluggish tourist arrivals, especially from Indonesia, which contributes ~28% of OUEHT’s room nights. 
  • The impact was also felt more prominently for guests from Australia and Malaysia. 

Keeping our HOLD rating 

  • Nevertheless, management highlighted that there has been an improvement in July, as it managed to attract more project groups. Although we expect 2H15 to show an improvement sequentially, we see the need to pare our FY15 and FY16 DPU forecasts both by 4.3%, on softer RevPAR and NPI margin assumptions, coupled with higher finance expenses. 
  • Consequently, our DDM-derived fair value is cut from S$0.92 to S$0.88. Maintain HOLD on OUEHT.

Wong Teck Ching Andy | http://www.ocbcresearch.com/ OCBC Investment Research 2015-08-14
HOLD Maintain HOLD 0.88 Down 0.92