OUE Commercial REIT - Riding Recovery & Demand-Supply Tailwinds
- OUE Commercial REIT (SGX:TS0U)’s 1HFY22 revenue and NPI of S$115.8m and S$93.6m were down 13.3% abd 14.2% y-o-y, below at 46.3% and 47.2% of our FY22F estimate. Lower revenue was due to S$5m in rental rebates at Lippo Plaza due to lockdowns in Shanghai in Apr-May 22 and deconsolidation of OUE Bayfront upon divestment of a 50% stake on 31 March 21 vs one quarter of contribution in 1H21.
- OUE Commercial REIT (SGX:TS0U)'s 1H22 DPU of S$0.0108 (-12.2% y-o-y) missed at 39.9% of our forecast.
- RevPAR at Hilton Singapore Orchard tripled q-o-q to S$302 as tourist numbers picked up, doubling portfolio RevPAR to S$226.
- Occupancy and average daily rates for Hilton Singapore Orchard improved from ~60% and S$300 per night to ~80% and S$500 per night as at end-Jun 22.
- Despite 2Q being a seasonally slow quarter, Hilton Singapore Orchard’s RevPAR of S$302 surpassed Mandarin Hotel’s 4Q19 (seasonal high) RevPAR of S$226, validating the decision to rebrand the hotel. However, due to manpower shortages, operational capacity is capped at 80%.
- Despite the remarkable ramp-up in operations since Mar 22, we think Hilton Singapore Orchard will generate minimum rents for FY22 given the reduced room inventory for FY22.
- Crowne Plaza Changi Airport’s RevPAR jumped 12.2% q-o-q to S$142 in 2Q22 after taking public bookings. Mandarin Gallery’s occupancy rose 1.6ppts q-o-q to 90.3% with shopper traffic and sales at ~90% and 85% of pre-COVID levels.
- OUE Commercial REIT's Singapore office portfolio occupancy ticked up from 90.9% to 92.9% as at end-1H22. Occupancy at OUE Bayfront dipped 3.1ppts q-o-q due to non-renewals. Average passing rents at OUE Bayfront were S$12.55 psf per month, the highest since its IPO, due to positive reversions in the past several months. Signing of a large tenant at OUE Downtown pushed occupancy from 87.8% to 93.0%, while One Raffles Place was stable q-o-q at 95.6%.
- Lippo Plaza saw occupancy dip from 91.6% to 87.7% as a tenant opted not to renew its lease citing business uncertainties.
- Our FY22-24F DPU estimates for OUE Commercial REIT is lowered by 6.9-9.8% on higher cost of borrowing assumptions and S$5m in rental relief provided for Lippo Plaza. We lower our DDM-based target price for OUE Commercial REIT to S$0.39.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-07-27 2022-07-27
Previous report by CGS-CIMB:
2022-02-17 OUE Commercial REIT - Holding Stable For Now
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