DBS Group Research has kept its "buy" call and 33 cents target price on OUE REIT , described as a counter "anchored in stability".
For its 2HFY2024 ended Dec 2024 period, OUE REIT reported a DPU of 1.13 cents, up 8.7% y-o-y, boosted by the removal of working capital retention, as well as the distribution from divestment proceeds of its stake in OUE Bayfront.
This brings full year DPU to 2.06 cents. While the FY2024 payout was down by 1.4% over FY2023, it was above expectations, says DBS in its Jan 23 note.
OUE REIT's overall portfolio valuation has held steady with gains from the Singapore office portfolio offset by losses at Mandarin Gallery and Hilton Singapore Orchard.
The REIT's gearing inched up slightly to 39.9% as at Dec 2024, up from 39.3% as of Sep 24 and DBS believes financing costs have likely peaked and that gearing is seen to dip to 35 - 36%, assuming proceeds from the sale of the underperforming Lippo Plaza Shanghai will be used to pare debt.
With this divestment, OUE REIT is now a "focused pure-Singapore play".
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DBS expects further positive rental reversion as those expiring in the current FY2025 had been signed at below market rates.
As such, DBS expects the operational performance of its portfolio to remain resilient this year.
"OUE REIT currently trades at 0.5x P/NAV, which is unwarranted in our view, given that it has de-risked its overall income profile," says DBS.
OUE REIT gained 1.67% as at 9.33am to change hands at 31 cent.
