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No Recovery In Sight Yet Based On OUE Hospitality 3Q2018 Financial Results

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It was another quarter of disappointing financial results for OUE Hospitality Trust. On 7th November 2018, OUE Hospitality Trust announced their 3Q2018 financial results. Despite claims of increasing tourists arrival to Singapore, the financial results was a sea of red.

Net Property Income (“NPI”) for 3Q2018 was $0.4 million lower than 3Q2017 due to lower gross revenue from the properties. Distributable income in 3Q2018 was S$1.3 million lower than in 3Q2017, and Distribution Per Share (“DPS”) for 3Q2018 was 1.28 cents, 5.9% lower than 3Q2017. The manager attributed the lower distribution to mainly the absence of income support for Crowne Plaza Changi
Airport (“CPCA”).

3Q2018 Results

Gross Revenue
Hospitality 24,739 25,425 (2.7)%
Retail 8,505 8,584 (0.9)%
Total 33,244 34,009 (2.2)%
Net Property Income
Hospitality 22,493 23,009 (2.2)%
Retail 6,562 6,455 1.7%
Total 29,055 29,464 (1.4)%
Distributable Income 23,335 24,678 (5.4)%
Distribution Per Unit (“DPU”) (cents) 1.28 1.36 (5.9)%

Hospitality Segment

RevPAR for Crowne Plaza Changi Airport (CPCA) improved 6.3% from S$176 in 3Q2017 to S$187 in 3Q2018. RevPAR for Mandarin Orchard Singapore (MOS) fell 3.7% from S$242 in 3Q2017 to S$233 in 3Q2018 due to average lower room rates.

Minimum rent was received for Crowne Plaza Changi Airport (CPCA) as the master lease income was below the minimum rent. If you didn’t know, both Crowne Plaza Changi Airport (CPCA) and Mandarin Orchard Singapore (MOS) are covered under the minimum rent, S$22.5 million and $45 million respectively. The rental under the Master Lease will be the minimum rent if the amount of variable rent for that operating year is less than the amount of minimum rent. The minimum rent allows some for of income stability.

Retail Segment

The retail segment for OUE Hospitality Trust has never been fantastic as it consists of only Mandarin Gallery. The retail revenue was lower due to lower effective rent of S$22.7 per square foot per month (psfpm)(3Q2017: S$22.9). The occupancy for Mandarin Gallery stood at 97%.


Despite the weak performance of OUE Hospitality Trust, I am holding on to it for the below valid reasons:-

  • For the first eight months of 2018, international visitor arrivals to Singapore was 12.6 million, an
    increase of 7.5% over the same period last year, while the number of visitor days increased 5.5%.
  • Jewel Changi Airport (“Jewel”) is set to open in March 2019. Changi Airport Group estimates that Jewel will see about 40 million to 50 million domestic and international visitors a year, of which 40% will be overseas visitors. CPCA could potentially benefit from the increase in visitor arrivals as Terminal 3 will be linked to Jewel via pedestrian bridge.
  • Terminal 1 is undergoing expansion works to increase its capacity while development plans for Changi East and Terminal 5 are on track.

Keep calm and collect dividends.

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