(See also: OUE Hospitality Trust posts 18.2% increase in 1Q DPS of 1.3 cents)
In separate reports on Friday, both research houses express the view that multiple catalysts are to continue driving OUE HT’s earnings in the financial year ahead – such as the enlarged Crowne Plaza Changi Airport (CPCA) where the trust will benefit from full year contribution of, in addition to income support for, Crown Plaza Changi Airport hotel extension (CPEX).
While revenue per available room (RevPAR) for Mandarin Orchard Singapore (MOS) has dropped 2.3% on-year to $217 over 1Q due to lower rates, OCBC lead analyst Deborah Ong points out how the hotel has renovated 430 rooms, and says she expects this to help the trust command better rates going forward.
She also believes increased traffic after the opening of Changi Airport Terminal 4 in 2H17 will help to drive OUE HT’s earnings in the next two to four years.
On the other hand, DBS analysts Mervyn Song and Derek Tan say that DPU growth of about 5% for OUE HT is still achievable over the current year, despite their projections of a 4% decline in FY17 RevPAR from MOS.
They also highlight how Mandarin Gallery has reported increased contributions over the quarter following the opening of its Michael Kors and Victoria’s Secret Stores in 2H16, despite having previously projected negative rental reversions of about 20%.
“While we now expect a recovery in the Singapore hospitality market to only occur in 2018 instead of 2017, OUE Hospitality Trust (OUE HT) is one of the best-positioned hospitality REITs to ride out near term headwinds,” opine the analysts.
“OUE HT’s share price corrected over the past year due to the overhang from capital raising to fund the acquisition of CPEX, and gearing that was over 40%. However, these concerns have now been addressed, following the recent rights issue which resulted in OUE HT’s gearing falling to c.38%,” they add.
