OUE Commercial REIT (OUE C-REIT) has increased its market capitalisation from S$1.3 billion to S$3.0 billion after its merger OUE Hospitality Trust. The REIT now sits at position 12 in terms of ranking by market capitalisation.
On 5th May 2020, OUE Commercial REIT has released its 1Q2020 financial result. How does OUE Commercial REIT fare after its merger, especially during the COVID-19 pandemic?
Gross Revenue increased by 40.5% to S$77.7 million. Net Property Income (“NPI”) also increased 42.5% to S$62.1 million. The amount for distribution was S$37.6 million. However, no distribution per unit (“DPU”) was declared because OUE Commercial REIT has changed its distribution frequency to a semi-annual basis.
Below is the 1Q2020 financial results.
1Q2020 Financial Results
| 1Q2020 (S$’mil) | 1Q2019 (S$’mil) | YoY(%) | |
| Gross Revenue | 77.7 | 55.3 | 40.5% |
| Net Property Income | 62.1 | 43.6 | 42.5% |
| Distributable Amount | 37.6 | 26.0 | 44.5% |
Occupancy
As you can see below, the occupancy for its commercial portfolio stood healthy at 94.3%.
Below is the average passing rent for the offices. I can see that passing rent is improving for its Singapore offices. The passing rent for its Shanghai offices as on a decline last quarter but has improved slightly in this quarter.
Revenue Per Available Room (RevPAR)
For the hospitality portfolio, we will now look at the RevPAR which is used to measure its hotel performance.
As we can see below, RevPAR fell dramastically. This is due to strict travel restrictions imposed from end January 2020. There was significant loss of demand from tourist arrivals as well as postponement and cancellation of planned MICE and social events. Although there was replacement demand from those on self-isolation as well as workers affected by border shutdowns, the operating environment remained weak.
The RevPAR at Mandarin Orchard Singapore declined 47.7% to S$110. Crowne Plaza Changi Airport recorded a decline of 23.9% to S$141.
Debt
The current gearing ratio stood at 40.2%. I still find this on the high side even though there was a decline as compared to 40.3% in 4Q2019.
Current Dividend Yield
Based on the current share price of S$0.40 and FY19 full year distribution of 3.31 cents, this translate to a current dividend yield of 8.23%.
Summary
In view of the COVID-19 pandemic, OUE Commercial REIT seems to be holding up well. The merger has proved to be beneficial. As you can see below, the office segment contributes 59.4% in terms of revenue. Retail segment and Hospitality segment makes up 18.9% and 21.7% respectively.
The increasing passing rent of its office portfolio can cushion the loss of revenue from its retail and hospitality segment which is badly impacted by COVID-19 pandemic.
While we can’t conclude the occupancy of the offices will not be impacted by the COVID-19 pandemic totally, having diversified asset types have proven to improve the resiliency of OUE Commercial REIT.
OUE Commercial REIT is now trading at an attractive current dividend yield of 8.23%. I am expecting the estimated dividend yield of 2020 to be lower given the lower contribution from the retail and hospitality segment but it should still hold up well as compared to other REITs with pure hospitality assets.
OUE Commercial REIT makes up 3.15% of my stock portfolio.