• Results ahead of IPO forecasts
• Broadly in line with our expectations
• Continued positive rental reversions

4Q14 results within expectations

OUE Commercial REIT’s 4Q14 distributable income and DPU came in at S$12.6m and 1.44 S-cent, respectively, which is 5.5% and 5.1% higher than forecasted in its IPO Prospectus. We judge these results to be within our expectations as FY14 (27 Jan 2014 to 31 Dec 2014) NPI of S$53.8m and distribution income of S$45.9m constitute 100.6% and 97.7% of our forecasts, respectively. In terms of the topline, FY14 gross revenue of S$71.5m was 3.6% ahead of the IPO forecast but was marginally below our expectations (only 96.7% of our forecast) due to a weaker than anticipated contribution from Lippo Plaza. This was negated through effective cost controls by the REIT manager which brought the NPI line back within expectations. The trust pays its distributions on a semi-annual basis, and the book closure for its 2H14 distribution of 2.84 S-cents per unit will be on 3 Feb 2015.

Manager expects positive rental reversion to continue

Overall portfolio occupancy was firm at 98.0% as at end Dec-14, up QoQ versus 97.2% as at end Sep-14. 19.8% of the portfolio, by gross rental income, is up for renewal in 2015 and management expects overall occupancy rates to stay in the healthy mid-90% range over the year ahead. OUE Bayfront remained 100% occupied as at end 4Q14, with average passing rents increasing from S$10.40 psf at IPO to S$10.58 psf. Newly committed rents over FY14 for OUE Bayfront ranged from S$11.22 to S$15.50 psf which is, on average, 14.9% higher than preceding rentals. Lippo Plaza’s occupancy rate increased QoQ to 96.0% as at end Dec-14 from 94.4% as at end Sep-14, and renewal rents in FY14 also showed a respectable 6.0% increase versus preceding rents. Looking ahead, management expects positive rental reversion at Lippo Plaza to continue at a 3.0%-5.0% rate. Maintain BUY with an unchanged fair value estimate of S$0.88.

Source: OCBC Research - 27 Jan 2015