In FY2025 ended Dec 31, 2025, OUE REIT’s revenue and net property income (NPI) grew 0.1% and 1.6% y-o-y to $273.6 million and $219.6 million, respectively.
In her Jan 27 report, Ada Lim of OCBC Group Research states that OUE REIT’s finance cost fell 17.6% y-o-y, as management’s efforts to optimise its balance sheet over the past few years bore fruit, coupled with a declining interest rate environment.
“Consequently, the amount to be distributed rose 8.9% y-o-y to $123.8 million. This translated to a full-year distribution per unit (DPU) of 2.23 Singapore cents, which was 8.3% higher y-o-y and exceeded our forecast by 7.6%,” says Lim.
Despite a “shaky performance” in its retail and hospitality segments, Lim believes both segments are expected to improve in FY2026, given a new management team at Hilton Singapore Orchard and positive feedback from the pop-up strategy, which is driving footfall and tenant sales at Mandarin Gallery.
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Focus on home turf
Meanwhile, OUE REIT continues to see Singapore as its core market. While the potential partial stake acquisition in Salesforce Tower has not been confirmed, management said it will fund it with divestment proceeds rather than tapping the equity market.
“We raised our FY2026 DPU projection by 9% and introduced our FY2027 forecasts. As a result, our fair value estimate lifts from 36 cents to 40 cents and reiterates our “buy” rating,” says Lim.
Meanwhile, CGS International’s Lock Mun Yee and Li Jialin have raised their target price from 38 cents to 41 cents on the back of management’s positive view of rental reversions for commercial assets and a better outlook for the hospitality segment, driven by a stronger event calendar.
They also predict that OUE REIT will have “ample dry powder” to support growth ahead. “Further interest expense savings will likely come from the refinancing of interest rate swaps and the $150 million medium-term note in FY2026, in our view. We estimate OUE REIT has over $300 million of debt headroom before gearing reaches 45%.”
Beyond acquisitions, management remains open to other value-creation initiatives for its Singapore assets, including the divestment of mature assets and the pursuit of value-accretive AEIs. “Management is also in advanced discussions with the regulatory authorities to convert in-building chiller system areas into office space at OUE Bayfront,” state Lock and Li.
Analyst Tabitha Foo of DBS Group Research says OUE REIT’s commercial portfolio remains a strong pillar, while hospitality performance is likely to have bottomed out.
In her Jan 28 report, she notes that OUE REIT’s three office assets — OUE Bayfront, One Raffles Place, and OUE Downtown — continue to see robust leasing momentum, following consecutive quarters of positive rental reversion and higher average passing rents.
“We anticipate mid-single-digit reversionary prospects over the next two years as core CBD Grade A office supply stays constrained amid a flight-to-quality trend. Meanwhile, we see early signs of turnaround at Hilton Singapore Orchard that could gain traction this year,” explains Foo.
As such, she is maintaining her “buy” call on OUE REIT, with a higher target price of 45 cents, up from 40 cents previously. “We adjust our estimates to reflect significantly higher interest savings, resulting in revised DPU forecasts of 2.41 cents and 2.57 cents for FY2026 and FY2027, respectively. Forward yield of nearly 6.5% remains attractive in our view,” says Foo.
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New team at Hilton
Last but not least, Liu Miaomiao of Maybank Securities raises her target price for OUE REIT from 38 cents to 45 cents. In her Jan 28 report, she expects the new management team at Hilton Singapore Orchard to deliver stable performance and 2%–5% revenue per available room (RevPAR) growth in FY2026.
Meanwhile, OUE REIT’s management is in active discussions with tenants regarding large leases due for renewal in FY2026, which account for around 19% of gross rental income. OUE REIT shares indicate that retention demand is strong, although additional capex cannot be ruled out.
On the other hand, Liu expects mid-single-digit rental reversion for the office segment and high-single-digit reversion for the retail segment in FY2026.
On the debt cost front, OUE REIT’s cost of debt fell by 20 basis points (bps) to 3.9%, with a further 30 bps in savings expected in FY2026, as 11.5% of debt is due for refinancing at lower margins.
“We raise our FY2026 and FY2027 DPU by 3.4% and 2.3% respectively, factoring in higher RevPAR assumption for hotels, lower borrowing costs and lower cost of equity assumption,” says Liu.
