OUE Hospitality Trust (OUEHT) reported its 4Q15 results which met our expectations. Although gross revenue increased 8.6% YoY to S$33.0m, DPU fell 4.5% to 1.70 S cents as a result of a larger unit base. For FY15, OUEHT’s gross revenue rose 7.5% to S$124.6m, and was 1.1% above our forecast. DPU of 6.55 S cents represented a decline of 2.8%, but was 1.6% ahead of our full-year projection.

Mandarin Orchard Singapore recorded a 3.7% YoY dip in RevPAR to S$236 in 4Q15, while RevPAR for Crowne Plaza Changi Airport Hotel declined from S$250 in 3Q15 to S$242 (no YoY comparison figures available). On the retail front, although passing rents for Mandarin Gallery increased from S$23.60 psf per month in 4Q14 to S$24.60 psf per month in 4Q15, the average rental reversion figure for leases signed continued to moderate, coming in at 2.4%, versus 6% in 3Q15.

Looking ahead, we believe the industry prospects remain challenging, given the subdued macroeconomic environment and competitive pressures from an expected increase in supply of new hotel rooms. Maintain HOLD and S$0.80 fair value estimate on OUEHT.

Source: OCBC Research - 26 Jan 2016