SINGAPORE (Jan 26): OCBC Investment Research is keeping OUE Hospitality Trust at “buy” with a higher fair value estimate of 75 cents, from 73 cents previously, on the back of gains from Crowne Plaza Changi Airport (CPCA).

This comes despite OUE H-Trust recording a 29.6% drop in FY16 DPU to 4.61 cents, mainly due to an enlarged unit base following the rights issue.

OUE H-Trust’s FY16 gross revenue dipped 1.7% to $122.5 million. This was mainly due to an 11.3% decline in retail revenue and partially mitigated by a 2.3% increase in contributions from hospitality.

Net property income dropped 1.6% to $107.4 million, while distribution income fell 5.6% to $82.5 million.

OUE H-Trust’s Mandarin Orchard Singapore saw gross revenue fall 2.4% to $71.7 million in FY16 as RevPAR fell to $217, from $230 in FY15.

However, OCBC believes Crowne Plaza will act as a buffer for OUE H-Trust to ride over the tough times.

Boosted by contributions from the recently acquired extension, Crowne Plaza saw gross revenue grow 26.4% to $18.2 million in FY16. And it is expected to be lifted further by the opening of Changi Airport’s Terminal 4 this year.

“While we are reluctant to expect an immediate boost from the opening of Terminal 4 in 2H17, we view Changi Airport’s capacity expansions as a strong medium-term (2- to 4-year) catalyst for higher contributions at CPCA,” says OCBC lead analyst Deborah Ong in a Thursday report.

In addition, Ong says OUE H-Trust is currently trading at attractive price levels.

Against its trading price of 68.5 cents on Wednesday, Ong notes that OUE H-Trust is trading at a FY17 forward dividend yield of 7.6% and at 89% of NAV.

“We see CPCA as a unique asset that is less affected by supply injections in the city, and believe it will act as buffer in this tough operating environment before the anticipated recovery in 2018,” Ong adds.

As at 12.04pm, units of OUE Hospitality Trust are trading flat at 68.5 cents.

Keeping the Crowne on OUE Hospitality Trust

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Keeping the Crowne on OUE Hospitality Trust

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