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Friday, February 25, 2022

OUE Commercial REIT Review @ 25 February 2022

Basic Profile & Key Statistics

OUE Commercial Trust (OUECT) is a diversified REIT that invests in office, hospitality and retail properties. OUECT owns 7 properties in Singapore and China.

Performance Highlight

Gross revenue and NPI declined YoY due to OUE Bayfront performance being accounted in shares of joint venture after 50% interest divestment. Nonetheless, distributable income and DPU are declined YoY due to the this divestment.

Rental Reversion
The rental reversion is a mixed. As compared to 2020 average passing rents for OUE bayfront, One Raffle Place and OUE downtown are improving. However, average passing rents for Lippo Plaza and Mandarin Gallery are declining. 

Revenue Per Available Room
In 4Q, REVPAR has been improved due to gradual relaxation of borders and VTLs arrangement. However, REVPAR for full year is slightly lower due to renovation for Mandarin Orchard Singapore.

Re-Branding
The relaunch has been scheduled on 1 March. 


Related Parties Shareholding

  • REIT sponsor's shareholding is high at 47.886%
  • REIT manager's shareholding is high at 4.152%
  • Directors of REIT manager's shareholding is low at 0.039%

Lease Profile

  • Occupancy is slightly low at 91.2%
  • WALE is short at 3.5 years
  • Highest lease expiry within 5 years is high at 42.7% which falls in 2026 and beyond, without breakdown
  • Weighted average land lease expiry is slightly short at 59.59 years

Debt Profile

  • Gearing ratio is moderate at 38.7%, including perps, gearing ratio is at 42.8%
  • Cost of debt is high at 3.2%
  • Fixed rate debt % is moderate  at 72.4%
  • Unsecured debt % is low at 29.1%
  • WADM is moderate at 3 years
  • Highest debt maturity within 5 years is low at 24.1% which falls in 2023
  • Interest coverage ratio is low at 2.7 times
  • Perpetual securities over debts is moderate at 9.7%

Diversification Profile

  • Top geographical contribution is high at 90.4% 
  • Top property contribution is high at 25.1% 
  • Top 5 properties contribution is high at 83.5% 
  • Top tenant contribution is high at 17.5% 
  • Top 10 tenants contribution is high at 48.7%

Key Financial Metrics

  • Property yield is low at 3.4% 
  • Management fees over distribution is low at 12.8% in which unitholders receive S$ 7.81 for every dollar paid 
  • Distribution on capital is low at 2.6%
  • Distribution margin is slightly low at 44.5%
  • 3.8% of the past 12 months DPU is from distribution from asset disposal
  • 10.7% of the past 12 months DPU is from income support

Trends

As the merger with OUEHT was completed in September 2019, let's only compare the trends from 4Q 2019.
  • Uptrend - Distribution on Capital, Distribution Margin
  • Flat - DPU
  • Slight Downtrend - NAV per Unit
  • Downtrend - Interest Coverage Ratio, Property Yield

Relative Valuation

  • P/NAV - Average for 1y, 3y & 5y
  • Dividend Yield - Average for 1y, 3y & 5y

Author's Opinion

Favorable Less Favorable
Diversified SectorLow Directors of REIT Manager's Shareholding
High REIT Sponsor's ShareholdingShort WALE
High REIT Manager's ShareholdingHigh Cost of Debt
Well Spread Debt MaturityLow Unsecured Debt %
Competitive Management FeesLow Interest Coverage Ratio
Distribution on Capital UptrendHigh Top Geographical Contribution
Distribution Margin UptrendHigh Top Property & Top 5 Properties Contributions
 High Top Tenant & Top 10 Tenants Contributions
 Low Property Yield
 Low Distribution on Capital
 High Income Support %
 Interest Coverage Ratio Downtrend
 Property Yield Downtrend

For this round of dividends, OUECT has released S$ 5 mils retention as well as S$ 5.4 mils from the divestment gain of 50% interest in OUE Bayfront. Moving forward, management expects the positive leasing momentum for the Singapore office to continue in 2022 and retail to benefit from gradual economic recovery.


You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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