Foo believes that this divestment is aligned with her value unlocking thesis on OUE REIT. “If further value unlocking is seen, investors will likely be looking at further dividends to be rewarded for the rise in asset values,” Foo predicts.
“Given that the exit price is close to book, this also signifies that OUE REIT’s net asset value (NAV) of 56 cents is realisable and can be achieved. If further divestments materialise, it implies that the current 40% discount is conservative,” Foo explains.
Following this divestment, Foo predicts that there will be questions surrounding an eventual privatisation, given the smaller portfolio size if a sale materialises for One Raffles Place that is currently on the market.
Given that pro forma distribution yield at 6.6% appears attractive for a largely Singapore-focused portfolio and with a price/book ratio at 0.6 times, Foo is maintaining a “buy” call on OUE REIT with a target price of 45 cents.
Meanwhile, Liu Miaomiao of Maybank Securities is keeping her “buy” call on OUE REIT with unchanged target price of 45 cents, given the upcoming special distribution of $20 million over the first two years following completion of the divestment and potential saving in finance expenses.
“On a pro-forma basis, aggregate leverage is expected to decline from 41.5% to 36.6%, creating meaningful debt headroom to support further acquisitions, including an increased stake in Salesforce Tower,” Liu predicts.
Liu adds that while Crowne Plaza Changi Airport contributed 10% of OUE REIT’s FY2025 revenue and will result in a loss in income from FY2027 onwards, OUE REIT’s management has guided that distribution per unit (DPU) could increase by 5.8% after taking into account the special distribution.
“As such,we have incorporated the loss in income from FY2027 onwards while factored potential savings in finance expense alongside the special distribution,” Liu concludes.
Finally, Ada Lim of OCBC Group Research has maintained a “buy” call with unchanged fair value of 41 cents on OUE REIT.
Lim states that the divestment is part of the REIT’s capital recycling strategy to exit from mature assets with lower yields and redeploy proceeds into high quality assets with better returns to close its NAV gap.
“This is a sizeable transaction, in our view – with Crowne Plaza Changi Airport contributing to around 10% of FY2025 revenue and 9.3% of portfolio value – and we are watchful of how the REIT eventually deploys the proceeds, as well as the timing and quality of any potential acquisitions,” Lim says.
Lim added that OUE REIT previously announced that it is exploring the divestment of One Raffles Place (ORP), and this remains ongoing.
“As the buyer is a joint venture involving OUE Limited, unitholders’ approval is required at an extraordinary general meeting (EGM) to be convened in 3QFY2026; thereafter, the transaction is expected to be completed in 4QFY2026. With that, we are leaving our forecast and fair value estimate unchanged in the interim,” Lim states.
As at 10.04am, Units in OUE REIT are trading 0.5 cents higher, or 1.4% up at 36 cents.
