OUE C-REIT Portfolio

OUE C-REIT 1H2022 Financial Results

OUE C-REIT Hilton

OUE Commercial REIT (OUE C-REIT) announced their 1H2022 Financial Results on 25th July 2022. I currently held 2.81% of OUE C-REIT in my stock portfolio.

OUE C-REIT comprises of assets from the Office sector and Hospitality sector. Both sectors are hit the hardest during the COVID-19 pandemic.

If you are an investor of OUE C-REIT and wonder if the REIT is bound for recovery, let us take a deeper look into its 1H2022 financial results below.

OUE C-REIT 1H2022 Financial Results

Gross revenue declined 13.3% year-on-year to S$115.8 million.

Net property income for 1H 2022 was S$93.6 million, 14.2% lower year-on-year mainly due to the deconsolidation of OUE Bayfront’s performance post the divestment of a 50% interest in the property on 31 March 2021.

Distribution amount was S$59.5 million for the financial period 1 January 2022 to 30 June 2022 (“1H 2022”), translating to a distribution per unit (“DPU”) of 1.08 cents. DPU declined 12.2% y-o-y.

The financial results are definitely not so rosy.

1H 2022
(S$’000)
1H 2021
(S$’000)
Change
Gross Revenue 115,837 133,546 (13.3)%
Net Property Income 93,604 109,045 (14.2)%
Distributable Income 59,542 67,212 (11.4)%
Distribution Per Unit (“DPU”) (cents) 1.08 1.23 (12.2)%

Office and Retail Occupancy

Singapore office properties committed occupancy was 92.9% while Lippo Plaza’s committed office occupancy declined to 87.7%.

OUE C-REIT only has 1 retail property which is Mandarin Gallery. The committed occupancy was 95.6%.

Office Lease Expiry Profile

The lease expiry for Lippo Plaza is worrying. As you can see, from the chart below, there is still a lot of leases that the manager need to work harder on to renew them.

RevPAR (Revenue Per Available Room)

For the Hospitality segment, we look at RevPAR instead of occupancy. RevPAR doubled Quarter-on-Quarter to S$226 in 2Q 2022.

This was largely driven by higher room rates at the newly rebranded Hilton Singapore Orchard as well as strong demand at both hotels due to the increase in tourist arrivals.

Hilton Singapore Orchard’s RevPAR tripled Quarter-on-Quarter to S$302, an increase of 33.6% from S$226 in 4Q 2019 before the property’s re-branding.

Crowne Plaza Changi Airport registered a 12.2% Quarter-on-Quarter increase in RevPAR to S$142.

Debt

As of 30 June 2022, gearing ratio is healthy at 39.2%.

Debt maturity profile is well-spread out with average term of debt at 2.7 years. S$178 million of debt due in 2022 will be refinanced ahead of maturity with the average cost of debt expected to remain stable.

Current Dividend Yield

Based on the closing price of S$0.38 and FY21 full year DPU of 2.60 cents, this translate to a current dividend yield of 6.84%.

Summary of OUE C-REIT 1H2022 Financial Results

In summary, below are the pros and cons

  • Gross revenue declined 13.3% year-on-year to S$115.8 million.
  • Net property income for 1H 2022 was S$93.6 million, 14.2% lower year-on-year.
  • DPU declined 12.2% y-o-y.
  • Singapore office properties committed occupancy stood healthy at 92.9%.
  • Lippo Plaza’s committed office occupancy declined to 87.7% and lease expiry for Lippo Plaza is worrying.
  • Gearing ratio is healthy at 39.2%.
  • At current price of S$0.38, the current dividend yield is attractive at 6.84%.

I am glad to see that RevPAR is recovering. This also means the overall hospitality sector is recovering as well and OUE C-REIT will benefit from it.

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