OUE COMMERCIAL REIT (SGX:TS0U)
OUE Commercial REIT - Divestment Of 50% Of Interest In Oue Bayfront Property
- OUE Commercial REIT's 2H20/ FY20 DPU fell 12.3%/ 26.6% y-o-y.
- S$5.8m of retained distribution was released.
- Hospitality segment collected minimum rents for FY20.
OUE Commercial REIT’s (OUECT) FY20 results came in within our expectations.
- OUE Commercial REIT (SGX:TS0U)'s 2H20 revenue was relatively flat at S$150m (-0.1% y-o-y), while NPI dropped marginally by 1% y-o-y to S$119.4m, mainly attributable to rental rebates (S$4.8m) granted to retail tenants, but partially offset by contribution from OUE Hospitality Trust (OUEHT) upon the completion of merger.
- OUE Commercial REIT released S$5.8m of distribution retained in 1H20. As such, 2H20 DPU was down 12.3% y-o-y to S$0.0143.
- For FY20, OUE Commercial REIT retained S$11m of capital distribution, of which S$6m relates to ongoing working capital requirements for the hospitality segment. On a full-year basis, OUE Commercial REIT's FY20 DPU fell 26.6% y-o-y to S$0.0243, which forms 102% of our full-year forecast.
FY20 rental reversions of 5.3%-20.1% for Singapore office
- As at 31 Dec 2020, committed occupancy of OUE Commercial REIT's commercial portfolio stood at 92.5% (-2.7 ppt y-o-y, +0.2 ppt q-o-q), weighed by lower occupancy rate at Mandarin Gallery (-7.2 ppt y-o-y, -2.8 ppt q-o-q) and office properties (-1.9 ppt y-o-y, +0.4 ppt q-o-q).
- Average passing rents for Singapore office properties remained largely stable while average passing rents for Lippo Plaza declined q-o-q. Occupancy improvement would remain the priority for Lippo Plaza. Shopper traffic and sales at Mandarin Gallery stabilised at ~80%/70% of pre-COVID-19 levels but leasing momentum is likely to remain weak with 36.2% of leases expiring in FY21.
- Management adopted flexible leasing strategies including shorter leasers and a higher gross turnover rent (GTO) component to some tenants to help them tide over the difficult period amid COVID-19.
- OUE Commercial REIT’s hospitality portfolio collected minimum rent of S$67.5m under the master lease arrangements in FY20. Full-year RevPAR was down 57.2% y-o-y but 4Q20 RevPAR improved 8% q-o-q due to better performance at Crowne Plaza Changi Airport.
Divestment of 50% of interest in OUE Bayfront, OUE Tower and OUE Link
- OUE Commercial REIT announced the divestment of 50% of interest in OUE Bayfront, OUE Tower and OUE Link to a fund managed by Allianz Real Estate Asia Pacific Pte. Ltd. at an agreed value of S$1,267.5m, representing 26.1% premium over purchase consideration in 2014 or 7.3% premium to book value.
- Post divestment, OUE Commercial REIT's gearing is expected to reduce from 41.2% to 34.5% on a pro forma basis, assuming net divestment proceeds of S$262.6m will be used to pare down debt. Management sees this as an opportunity to optimise capital structure while maintaining exposure to Singapore office market.
- 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.
- We roll forward our forecasts and take into account the divestment of interest, our fair value estimate for OUE Commercial REIT increases slightly from S$0.39 to S$0.40.
OCBC Research Team
OCBC Investment Research
|
https://www.iocbc.com/
2021-02-02
SGX Stock
Analyst Report
0.400
UP
0.390
