OUE Commercial REIT’s (OUECT) 3Q20 revenue and NPI rose 12%/11.4% YoY to S$70.9m and S$55.8m respectively, primarily driven by its merger with OUE Hospitality Trust (OUEHT), but partially offset by rental rebates of S$5m to retail tenants. Committed occupancy of its commercial portfolio was down 2.9ppt YoY to 92.3% in 3Q20.

Office occupancy in Singapore recovered 0.8ppt QoQ to 94.5% with positive rental reversions of 2.9% to 22.1% as leasing activities resumed post Circuit Breaker.

For its hospitality segment, 3Q20 RevPAR declined 60.8% YoY but improved 60.5% QoQ.

While demand from government booking is likely to cease in Dec 2020 or early 2021 for Mandarin Orchard Singapore (MOS), we expect demand from air crew at Crowne Plaza Changi Airport (at higher rates than government bookings) to continue in 2021.

Renovation at MOS will commence in early 2021 in phases with the new Hilton Singapore Orchard expected to open in 2022 to capture the recovery in the Singapore hospitality sector.

Our fair value remains at S$0.39. BUY.

Source: OCBC Research - 17 Nov 2020