OUE Hospitality Trust (OUEHT) reported its 3Q14 results which exceeded its IPO prospectus projections marginally, but was within our expectations. Gross revenue came in at S$28.5m, of which S$19.2m and S$9.3m was contributed by its Hospitality (Mandarin Orchard Singapore) and Retail (Mandarin Gallery) segments, respectively. This was 0.7% higher than its forecast. DPU of 1.64 S cents was 2.5% above its 1.6 S cents projection. For 9M14, revenue and DPU of S$85.5m and 4.96 S cents was 0.7% and 3.1% above OUEHT’s forecast; and constituted 75.4% and 74.0% of our FY14 estimates, respectively.

OUEHT managed to achieve a higher RevPAR of S$252 in 3Q14, versus its S$248 forecast, due to the completion of its Mandarin Orchard Singapore renovation and higher guests’ contribution from the corporate business segment. However, this was still lower than the S$261 RevPAR attained in 3Q13 (after adjusting for the shorter financial period since it was listed on 25 Jul 2013), attributed to the strong visitor arrivals to Singapore last year. In terms of balance sheet strength, OUEHT’s gearing stands healthy at 32.7%, with an average cost of debt of 2.2%. 100% of its debt has also been fixed via interest rate swaps. We maintain our HOLD rating and S$0.85 fair value on OUEHT.

Source: OCBC Research - 4 Nov 2014