- OUE REIT delivered a largely in-line 1QFY25 performance anchored by its 100% Singapore-focused portfolio. Adjusted revenue and NPI declined 3.9% and 4.1% y-o-y respectively, excluding contribution from Lippo Plaza, mainly attributed to weaker hospitality performance.
1Q25 adjusted revenue and NPI largely in line with expectations
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- Mandarin Gallery retail occupancy hit a record high of 99.5%, with 4.9% rental reversions.
- Hospitality RevPAR moderated 11.2% y-o-y to S$248 for the quarter, as weakness in Hilton Singapore Orchard (-19.1% y-o-y) offset the improvement at Crowne Plaza Changi Airport (+8.9% y-o-y).
- Financing costs fell 11.3% y-o-y to S$ 22.6mil as cost of debt declined to 4.2% (-30bps y-o-y, -50bps q-o-q). Leverage rose slightly to 40.6%, but interest coverage remained stable at 2.1x.
Our view:
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- An attractive pipeline of events in Singapore could drive improved RevPAR for its Singapore hotels, presenting improved momentum going forward.
- Trading at 0.5x P/B and a FY25-26F yield in excess of 7%, we like OUE REIT for its relative value to its pure-play peers. Maintain BUY with unchanged target price of S$0.33.
Portfolio should see overall resilience.
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