SINGAPORE (Jan 3): RHB is maintaining its “buy” call on OUE Hospitality Trust (OUE HT), while raising its target price on the REIT to 91 cents from 88 cents previously to factor in a cost of equity (COE) of -7.2% and 2% terminal growth for FY18F and FY19F, respectively.
This implies that the stock offers a respective FY18F-19F yield of 6.2% and 6.6% as distribution per unit (DPU) projections are adjusted higher by 2-3%, after taking into consideration interest cost savings from the early refinancing of the trust’s debts as its manager announced on 19 Dec.
In a Wednesday report, analyst Vijay Natarajan says the move places OUE HT in good shape ahead of the expected interest rate hikes in the near-term, as the average cost of debt post-refinancing would be 2.4%, or 40bps lower than the current interest cost of 2.8%. This should result in finance cost savings of $2-4 million per annum.
