• OUE Commercial REIT (OUECT)’s 2Q18 DPU of 1.06 Scts (-7.8% y-o-y) below expectations.
• Drag from lower occupancies at One Raffles Place Shopping Mall and higher borrowing costs.
• Impact from positive rental reversions to temper the loss of income support in FY19.

Range-bound

We maintain our HOLD call on OUE Commercial REIT (OUECT) with a revised Target Price of S$0.67.

While we see long-term value in OUECT as it trades at 15% discount to its book value and spot office rents in Singapore have started to recover, we believe the stock will trade range-bound in the near term given the headwinds from the loss of income support in FY19 and an expected fall in DPU in FY18 and FY19. 

Source: DBS Research - 03 Aug 2018