OUE HOSPITALITY TRUST (SGX:SK7)
OUE Hospitality Trust - 1Q Results Slightly Below Expectation
- OUE HOSPITALITY TRUST (SGX:SK7) posted 1QFY19 DPU of SGD0.0118, down 6.3% y-o-y. Gross revenue and NPI dipped 3% and 2% y-o-y due to lower revenue from the hospitality segment, but partially mitigated by lower operating expenses.
- Finance costs were higher by 10% y-o-y resulting in a 6% decline in distributable income.
Our Comments
- OUE HOSPITALITY TRUST (SGX:SK7)'s 1Q results were slightly below expectations, accounting for 23% of our full-year DPU estimates. Key reason being weaker-than-expected performance at Mandarin Orchard Singapore (MOS).
- MOS’ operating metrics were weaker on lower y-o-y room rates due to soft corporate and wholesale demand. Food and beverage (F&B) sales were also impacted due to lower banquet sales following the suspension of services at the Grand Mandarin Ballroom and its attached kitchens.
- Crowne Plaza Changi Airport’s operating performance improved slightly with a RevPAR of SGD185 (+1% y-o-y) but still below the minimum rent threshold for the asset. The recent opening of Jewel Changi Airport is likely to have a positive impact on the asset in coming quarters.
- The retail segment fared much better with Mandarin Gallery’s (MG) NPI increasing 2.5% y-o-y on the back of higher occupancy for the mall and lower operating expenses. The mall achieved full occupancy as of Mar 2019 with new leases secured during the quarter, and achieving positive rent reversions 5.8%. The improved occupancy and rent growth came in as positive surprises amidst a challenging retail climate.
- On 8 Apr 2019, OUE COMMERCIAL REIT (SGX:TS0U) announced its plans to merge with OUE HOSPITALITY TRUST (SGX:SK7). The deal is subject to approval from the court and unitholders (for both REITs) and is expected to be completed by 3Q19. We maintain our earlier view that the merger terms are fair and recommend unit holders to accept the offer.
- TAKE PROFIT, Target Price: SGD0.76.
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2019-05-03
SGX Stock
Analyst Report
0.760
SAME
0.760
