OUE Commercial REIT reported that 2Q16 amount available for distribution and distribution per unit (DPU) increased 38.6% and 34.7% YoY to S$17.7m and 1.36 S-cents, respectively, primarily due to the absence of One Raffles Place contributions (acquired in Oct 2015) in the same period last year and stronger contributions from the trust’s initial portfolio comprising OUE Bayfront and Lippo Plaza, which saw 2Q16 net property income grow 15.9% YoY; these were partially offset by higher property operating expenses and finance costs.

We judge these numbers to be broadly within expectations and 1H16 amount available for distribution now cumulates to 54.5% of our full year forecast. OUECT’s overall portfolio occupancy remained stable at 94.5% (versus 94.8% as at end 1Q16), while we continue to see positive rental reversions of 1.8%, 2.1% and 9.0% at OUE Bayfront, One Raffles Place and Lippo Plaza, respectively. Maintain HOLD on OUECT with an unchanged fair value estimate of S$0.65.

Source: OCBC Research - 3 Aug 2016