OUE C-REIT 1H2023 Financial Results

OUE C-REIT 1H2023 Financial Results

OUE C-REIT 1H2023 Key Highlights

On 26th July 2023, OUE Commercial REIT (OUE C-REIT) released their 1H2023 Financial Results. Just a recap, OUE C-REIT has 3 categories of properties in its portfolio which are office, hospitality and retail.

OUE C-REIT has a set of strategically located assets in the prime business districts of Singapore and Shanghai.

In Singapore the assets under OUE-C-REIT are OUE Bayfront, One Raffles Place, One Raffles Place, Mandarin Gallery, Hilton Singapore Orchard and Crowne Plaza Changi Airport.

In Shanghai, it has Lippo Plaza.

How is OUE C-REIT performing? Let us take a deeper look into its 1H2023 financial results below.

OUE C-REIT 1H2023 Financial Results

OUE C-REIT’s revenue for 1H 2023 grew 19.8% year-on-year (“YoY”) to S$138.8 million. The growth was attributed to the recovery in Singapore’s tourism sector and YoY improvements in operational performance for OUE C-REIT’s portfolio.

Despite the growth in revenue, the amount to be distributed for 1H 2023 was 3.3% lower YoY at S$57.6 million mainly due to higher YoY finance costs from the elevated interest rate environment and the absence of income support for OUE Downtown Office.

As a result, the distribution per unit (“DPU”) for 1H 2023 was 1.05 cents, 2.8% lower YoY.

1H2023
(S$’000)
1H2022
(S$’000)
Change
Gross Revenue138,802115,83719.8%
Net Property Income115,26593,60423.1%
Property expenses
58,21433,40574.4%
Amount Distributable To Unitholders57,58459,542(3.3)%
Distribution Per Unit (“DPU”) (cents)1.051.08(2.8)%

Debt

As of 30th June 2023, the aggregate leverage stood at 39.1% which in my opinion is still considered stable.

In June 2023, OUE C-REIT completed the refinancing of existing borrowings with a S$430 million unsecured sustainability-linked loan (“SLL”) with the weighted average term of debt lengthening to 3.0 years as at 30 June 2023.

OUE C-REIT 1H2023 Debt Maturity Profile

68.2% of the total debt were hedged into fixed rates and weighted average cost of debt was 4.1% per annum.

Occupancy

OUE C-REIT’s Singapore office portfolio committed occupancy and average passing rent remained healthy at 96.1% and S$10.22 per square foot (“psf”) per month, respectively. Positive rental reversion of 8.1% was recorded for office lease renewals in 2Q 2023.

In Shanghai, Lippo Plaza’s committed office occupancy increased 11.4 ppt quarter-on-quarter to 86.6% due to the Manager’s proactive leasing strategy and focus on sustaining occupancy. However, the average office passing rent declined 2.4% to RMB8.50 per square metre (“psm”) per day.

OUE C-REIT 1H2023 Office Occupancy

In terms of the occupancy for retail segment, Mandarin Gallery’s committed occupancy (excluding short-term leases) increased 3.5% quarter-on-quarter to 96.4%. Including short-term leases, the committed occupancy was 98.0%.

Rental reversion continued to be positive for the fourth consecutive quarter at 5.5% in 2Q 2023. Shopper traffic and tenant sales in 2Q 2023 remained stable at 98% and 83% of pre-COVID levels, respectively.

RevPAR (Revenue Per Available Room)

OUE C-REIT 1H2023 RevPAR

For 1H 2023, the hospitality segment revenue per available room (“RevPAR”) increased 34.3% YoY to S$232. Hilton Singapore Orchard’s 1H 2023 RevPAR was 16.5% higher YoY at S$246 while Crowne Plaza Changi Airport recorded a 54.1% YoY increase to reach S$207.

Current Dividend Yield

OUE C-REIT Share Price 4 August 2023

Based on the current share price of S$0.30 and FY22 full year distribution of 2.12 cents, the current dividend yield is high at 7.07%.

Summary of OUE C-REIT 1H2023 Financial Results

Based on OUE C-REIT’s 1H2023 financial results, the pros are:

  • OUE C-REIT’s revenue for 1H 2023 grew 19.8% year-on-year (“YoY”) to S$138.8 million riding on the recovery in Singapore’s tourism sector.
  • Aggregate leverage stood at 39.1% which in my opinion is still considered stable.
  • 68.2% of the total debt were hedged into fixed rates to mitigate against sudden hikes in interest rates.
  • Singapore office portfolio committed occupancy and average
    passing rent remained healthy at 96.1% and S$10.22 per square foot (“psf”) per month.
  • Lippo Plaza’s committed office occupancy increased 11.4 ppt quarter-on-quarter to 86.6% even though it is still far from my ideal target of above 95%.
  • Mandarin Gallery’s committed occupancy (excluding short-term leases) increased 3.5% quarter-on-quarter to 96.4%. Including short-term leases, the committed occupancy was 98.0%. The mall achieved positive rental reversion for the fourth consecutive quarter at 5.5% in 2Q 2023.
  • Hospitality segment revenue per available room (“RevPAR”) increased 34.3% YoY to S$232.
  • The current dividend yield is high at 7.07%.

The cons are:

  • Amount to be distributed for 1H 2023 was 3.3% lower YoY at S$57.6 million mainly due to higher YoY finance costs. This means costs is something OUE C-REIT need to manage better.
  • Distribution per unit (“DPU”) for 1H 2023 was 1.05 cents, 2.8% lower YoY.
  • China office market remains a drag with average office passing rent declining 2.4% to RMB8.50 per square metre per day.

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