OUE Hospitality Trust’s (OUEHT) 3Q results were in-line, albeit on the lower end. As expected, 3Q18 results looked weak on a YoY basis due to the high RevPAR base in 3Q17 as well as the absence of Crowne Plaza Changi Airport (CPCA) income support.

Gross revenue dropped 2.2% YoY to S$33.2m, with hospitality revenue down 2.7% YoY and retail revenue down 0.9%. 3Q DPU dropped 5.9% to 1.28 S cents or 25.4% of our initial full-year forecast, mainly because OUEHT no longer receives CPCA income support, partially offset by lower interest expense.

3Q RevPAR for Mandarin Orchard Singapore was down 3.7% on the back of lower average room rates, while RevPAR for CPCA was up 6.3% YoY as the asset continues to stabilise. According to our current estimates, OUEHT is trading at a 7.4% FY18F yield and 7.6% FY19F yield.

We maintain our BUY rating on OUEHT but place our fair value of S$0.79 under review pending further details.

Source: OCBC Research - 8 Nov 2018