OUE Commercial REIT 1Q2020 Financial Results

OUE Commercial REIT

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%.

OUE Commercial REIT Occupancy 1Q2020

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.

OUE Commercial REIT Passing Rent 1Q2020

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.

OUE Commercial REIT 1Q2020 RevPAR

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%.

OUE Commercial REIT Share Price 6 May 2020

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 Revenue Contribution By Asset

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.

Screening For Dividend Stocks In April 2020

Screening For Dividend Stocks In April 2020

Last month, the stock market had crashed due to the impact of COVID-19. Since then, the stock market has started its recovery when news of government from different countries started to provide stimulus budget to revive the economy. During the crisis, I have picked up OCBC Bank, Singtel, US Manulife REIT and added more of CapitaMall Trust when their stock prices fell. If you didn’t know, I am a dividend investor. Thus, I usually look out for stocks with attractive dividend yield that provides me with endless dividends many years ahead. The stock market crash has provided me with such an opportunity.

I will run the Stocks Café stock screener every month which gives me a list of stocks that fulfill my dividend criteria. I fall into the medium risk type of investor and thus I never looked at stocks with dividend yield more than 10%. Below are the criteria that I used to identify dividend stocks.

  • Current Yield (%) >= 5 and <= 10
  • Price / Earnings <=20
  • Price / Book <= 3
  • Market Capitalization >= 1B

Below are the top dividend yielding stocks as of 10th April 2020. I believe you will see some REITs that you have been eyeing for before the stock market had crashed. Even though the stock prices have started the recovery, the current yield is still attractive.

Name Current Yield % P/E P/B Market Cap
Mapletree NAC Trust 9.981 4.44 0.611 2.8B
OUE Commercial REIT 8.711 13.38 0.618 2B
Ascendas-iTrust 8.644 5.29 1.084 1.4B
DBS 7.837 7.65 0.998 48.7B
Frasers Logistics and Industrial Trust 7.568 9.05 0.974 2.1B
CapitaRetail China Trust 7.557 8.46 0.845 1.6B
Frasers Commercial Trust 7.385 7.91 0.794 1.2B
Suntec REIT 7.37 9.21 0.605 3.6B
CapitaMall Trust 7.125 8.89 0.798 6.2B
Ascendas REIT 7.038 17.7 1.29 10.1B
Yanlord Land 6.733 2.97 0.358 2B
ComfortDelgro 6.527 12.25 1.252 3.2B
Frasers Centrepoint Trust 6.275 9.41 0.87 2.2B
UOB 6.197 7.74 0.849 33.4B
SIA Engineering 6.18 10.44 1.29 2B
CapitaCommercial Trust 6.082 12.77 0.784 5.6B
SPH REIT 6.081 11.84 0.786 2.1B
TCIL HK$ 6.044 17.2 0.329 3.7B
SATS 5.938 15.9 2.211 3.6B
OCBC Bank 5.922 7.91 0.863 39.4B
Jardine Cycle & Carriage 5.833 6.71 0.875 8.1B
Mapletree Commercial Trust 5.595 5.45 0.955 5.6B
Yangzijiang Ship Building 5.435 5.9 0.601 3.6B
Guocoland 5.385 5.72 0.374 1.4B
Olam International 5.208 9.01 0.852 4.6B
SPH 5.195 12.19 0.72 2.5B
Frasers Property 5.128 7.32 0.453 3.4B
Lonza 5.042 5.72 0.659 5.9B

Last, I just want to mention again that the above list is for reference only and we should do our homework before buying into the stock simply for the dividend yield.