OUE Commercial REIT kept at 'hold' as more time needed for positive rental reversions

OUE Commercial Trust OUE Bayfront

OUE Commercial REIT kept at 'hold' as more time needed for positive rental reversions

Stanislaus Jude Chan
06/11/17, 04:54 pm

SINGAPORE (Nov 6): OCBC Investment Research is keeping its “hold” rating on OUE Commercial REIT (OUE C-REIT) with an unchanged fair value estimate of 67 cents.

“While office rents in Singapore appear to be bottoming out, it is apparent that more time will be needed for positive rental reversions to surface,” says OCBC lead analyst Joseph Ng in a report on Nov 3.

This comes after OUE C-REIT saw its 3Q17 distribution per unit (DPU) fall 12.9% to 1.15 cents, from 1.32 cents a year ago.

Group revenue for 3Q17 declined 2.1% to $43.3 million on lower retail rental income at One Raffles Place Shopping Mall due to the ongoing rebalancing of tenant and trade mix at the mall.

Net property income was 3.5% lower at $34.1 million, mainly due to higher leasing commission stemming from an improvement in office occupancy, as well as higher tax expenses.

See: OUE Commercial REIT posts 12.9% drop in 3Q DPU to 1.15 cents

However, Ng says that OUE C-REIT’s 3Q results were in-line with expectations, with revenue and DPU forming 24.2% and 24.6% of the research house’s full-year forecast, respectively.

On the plus side, OUE C-REIT’s Lippo Plaza turned in a set of robust results on the back of its 100% committed office occupancy.

In its Singapore portfolio, Ng notes that the average passing rent for OUE Bayfront seems to have stabilised at $11.44 psf/month, even though committed occupancy dipped slightly to 98.2%.

Meanwhile, average passing rent at One Raffles Place was marginally lower $10.10 psf/month, but committed occupancy rose 1.6 percentage points to 95.4%.

“According to CBRE, CBD Grade A office rents rose 1.7% q-o-q to $9.10 psf/mth in 3Q17, marking the first increase in 10 quarters,” Ng says.

However, he adds that “depending on the recovery in spot rents, negative rental reversions could extend into the coming year.”

As at 4.48pm, units of OUE C-REIT are trading flat at 72 cents, implying an estimated FY17 distibution yield of 6.5%.

Living it up

SINGAPORE (Mar 25): This is the season for indices. On March 20, Singapore was ranked 34th in the World Happiness Index — less happy than Taiwan, but far more cheery than Hong Kong and China, as well as its neighbours, Thailand, Malaysia and Indonesia. Globally, the Scandinavian and north European cities top the index; and New Zealand, Canada and Austria round out the top 10. The index this year focuses on happiness and the community, taking into account how happiness has evolved over the years, as affected by technology, social norms, conflicts and government policies. A week earlier, th....

The charismatic bankrupt who allegedly pulled the strings behind Singapore's largest stock manipulation scandal

SINGAPORE (Mar 26): Garbed in purple overalls, John Soh Chee Wen cuts a relaxed figure as he takes his seat. The garment falls fittingly on his athletic frame, not unlike a designer suit. It could well have made a fashion statement, save for the word "prisoner" emblazoned in white across the back. As his legal team huddled around him before the start of the trial, the 60-year-old is a picture of calm. At one point, he casually flashes a thumbs up at his lead counsel, N Sreenivasan, a managing director and senior counsel at Straits Law LLP. Then, as he turns back to his seat in the dock, ....

OCBC still bullish on banking stocks after a lacklustre FY18

SINGAPORE (Mar 26): OCBC Investment Research remains bullish on Singapore’s banking space while keeping its sector “overweight” with “buy” calls on both DBS and UOB, which have been given fair value estimates of $29.31 and $28.30, respectively. Both stocks had dividend yields of 4.8%, with DBS and UOB trading at the respective book values of 1.3 times and 1.1 times, or at an average of 1.2 times historical book as at the close of Wednesday. In a Tuesday report, OCBC analyst Carmen Lee notes that raising this average to 1.3 times book and factoring a 10% premium for DBS over the....