SINGAPORE (July 30): CGS-CIMB Research is maintaining its “add” recommendation on OUE Hospitality Trust (OUE HT) while lowering its target price to 89 cents from 92 cents, after adjusting cost of equity (COE) assumption up to 8.6% compared to 8.4% previously.

Post the release of OUE HT’s 2Q18 results, the research house maintains its FY18-20F DPU forecasts, and notes that the trust is trading at 6.2% FY18F yield while offering about 14% total return at its unit price of 83 cents.

In a report last Friday, analyst Eing Kar Mei says she remains confident that Crowne Plaza Changi Airport (CPCA) will earn higher-than-minimum rent in FY19F considering the continued ramp-up of Terminal 4 as well as the opening of Jewel Changi Airport in 1H19.

Although Mandarin Orchard Singapore’s (MOS) RevPAR took a hit over the latest quarter due to a decline in its corporate segment, Eing believes this is compensated by higher overall transient business portfolio and steady performance in the wholesale segment, with the management retaining its upbeat outlook for 2H.  

She also highlights how Mandarin Gallery continued its q-o-q uptrend in average occupancy rate with a positive rental reversion in base rent for leases signed in 2Q, even as retail revenue fell on-year as a result of negative rental reversions in preceding quarters.

“Re-rating catalysts could come from accretive new acquisitions while downside risks could come from higher-than-expected rate hikes and slower-than-expected recovery in the Singapore hospitality market,” concludes Eing.

As at 11.51am, units in OUE HT are trading 1.8% lower at 81 cents or 1.07 times Dec-19F book value.