OUE Commercial REIT - OCBC Investment 2020-02-03: Enjoying The Rental Upcycle In Singapore

OUE COMMERCIAL REIT (SGX:TS0U) | SGinvestors.io 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






Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-02-03
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.55 UP 0.535



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