OUE COMMERCIAL REIT (SGX:TS0U)
OUE Commercial REIT - Enjoying The Rental Upcycle In Singapore
- OUE Commercial REIT's 4Q19 results were in-line.
- Strong performance from SG offices.
- Higher Fair Value estimate of S$0.55.
4Q19 DPU rose 12% YoY
- OUE COMMERCIAL REIT (SGX:TS0U)’s posted first full quarter results upon completion of merger in Sep 2019.
- 4Q19 revenue rose 80.7% y-o-y to S$86.8m, while NPI grew 92.6% y-o-y to S$70.6m, mainly attributable to the consolidation of OUE Downtown Office’s income since Nov’18 and contribution from OUE Hospitality Trust.
- 4Q19 DPU was up 12% y-o-y to 0.84 S cents, which forms 26% of our full-year forecast.
- On a full-year basis, OUE Commercial REIT’s FY19 DPU, however, fell 4.9% y-o-y to 3.31 S cents due to enlarged unit base.
- As at 31 Dec 2019, OUE Commercial REIT’s gearing stands at 40.3%, with average cost of debt of 3.4% per annum (previously 3.5%).
Positive rental reversions for Singapore offices
- OUE Commercial REIT’s commercial portfolio which consists of 4 office properties (OUE Bayfront, One Raffles Place, OUE Downtown and Lippo Plaza) and 1 retail property (Mandarin Gallery) reported improved committed occupancy of 95.2% in 4Q19 (+0.5ppt from 94.7% in 4Q18). Occupancy rate of OUE Commercial REIT’s Singapore offices was 95.7% vs market occupancy rate of 96.1% while occupancy of Lippo Plaza in Shanghai was 89.9% vs. market occupancy of 87.6%.
- As for rental reversions, OUE Commercial REIT’s Singapore offices recorded strong positive rental reversions in the range of 9.4% to 26.5% in 4Q19 as rents for renewed leases were higher than expiring rents.
- Average passing office rent for Singapore offices were higher y-o-y growth as a result of consecutive quarters of positive rental reversions while Lippo Plaza’s average passing office rent was down 1.7% y-o-y to RMB9.65 psm/day. Mandarin Gallery’s occupancy was 98.3% while average retail rent remained stable in 4Q 2019.
- We expect good rental reversions potential with ~20% of OUE Commercial REIT’s commercial portfolio by GRI due for renewal in 2020, and ~28% due in 2021.
Crowne Plaza Changi Airport RevPAR rose 9.9% y-o-y
- For OUE Commercial REIT’s hospitality portfolio, 4Q19 RevPAR improved 1.9% y-o-y to S$216, on the back of higher occupancy and ADR at Crowne Plaza Changi Airport. Crowne Plaza Changi’s RevPAR rose 9.9% y-o-y to S$198 in 4Q19, boosted by stronger travel demand while Mandarin Orchard Singapore saw a 1.3% fall in RevPAR to S$229 this quarter as it continued to face downward pressure in the trading environment.
- Management disclosed that Chinese tourists contributed ~10% of their hotel businesses and some booking cancellations were seen but the impact so far is minimal.
- After adjustments, our fair value increases from S$0.535 to S$0.55.
- See OUE Commercial REIT Share Price; OUE Commercial REIT Target Price; OUE Commercial REIT Analyst Reports; OUE Commercial REIT Dividend History; OUE Commercial REIT Announcements; OUE Commercial REIT Latest News.
Chu Peng
OCBC Investment Research
|
https://www.iocbc.com/
2020-02-03
SGX Stock
Analyst Report
0.55
UP
0.535
