OUE HOSPITALITY TRUST
SK7.SI
OUE Hospitality Trust (OUEHT SP) - Is The Strong RevPAR Sustainable?
- Despite a stronger RevPAR (+1.7% YoY) in 3Q15, we think that the growth is unlikely to be prolonged given the weakness in both the Indonesian arrivals and upscale hotels.
- Maintain SELL with an unchanged DDM-derived SGD0.73 TP (11% downside).
- We continue to see weakness within the overall hospitality sector.
- 3Q/9M15 results were within our expectations as it met c.76% of our forecast.
3Q/9M15 results were within our expectations.
- OUE Hospitality Trust (OUEHT) posted a 4.9%/-2.2% YoY decline in 3Q/9M15 distribution per unit (DPU) to SGD1.72/SGD1.64, accounting for c.76% of our full year estimates. This was underpinned by a 5.8/-1.3% YoY growth in its 3Q/9M15 distributable income mainly due to an additional contribution from Crowne Plaza Changi Airport while its gearing ratio remained high at 42.1%.
Why we remain cautious despite positive growth in RevPAR?
- Despite the weakness in tourist arrivals number, 3Q15 RevPAR for OUEHT was up 1.7% YoY to SGD245 from SGD241.
- The higher RevPAR was mainly due to a higher occupancy driven by leisure and group businesses in the quarter.
- Despite the positive growth in its RevPAR, we are cautious over its sustainability as its portfolio is heavily exposed to Indonesia arrivals.
- As at 3Q/9M15, Indonesia arrivals declined 5.3/11.0% YoY. In addition, the average RevPAR for Singapore’s upscale hotels in 3Q/9M15 has fallen 0.6/2.5% YoY.
- Given the weakness in Indonesian arrivals, it is more likely that the growth is unsustainable, in our view.
Mandarin Gallery remains healthy as it registers positive rental reversion.
- Occupancy levels in Mandarin Gallery (MG) remains high, inching up slightly to c.98%, with an effective rental psf/month (mth) of SGD25.00psf/mth (3Q14: SGD23.90 psf/mth).
- In addition, the upscale shopping mall has managed to ink c.22% of its net lettable area (NLA), with an average rental reversion of c.6%.
Maintain SELL with a SGD0.73 TP.
- In view of a supply glut within the hospitality industry and weakness in Indonesian arrivals, we continue to expect OUEHT to face headwinds.
- Maintain SELL with a unchanged DDM-derived SGD0.73 TP.
Ivan Looi
RHB Research
|
Ong Kian Lin
RHB Research
|
http://www.rhbinvest.com.sg/
2015-11-13
RHB Research
SGX Stock
Analyst Report
0.73
Same
0.73
