OUE reported 2Q14 PATMI of S$4.4m, down 69.6% YoY due to lower contributions from Mandarin Gallery and Mandarin Orchard Singapore (now held through an equity interest in OUE Hospitality Trust), offset partially by lower finance expenses. 2Q14 topline declined 10.6% YoY to S$100.2m due to the absence of contributions from two Chinese hotels divested in Sep-13 and lower revenues from the Development Property division. Gross profit for the quarter similarly dipped 33.8% YoY to S$36.7m as cost of sales increased with the recognition of rental expense to OUE Hospitality Trust. Overall, we judge 2Q14 results to be marginally below expectations due to lower than anticipated gross margins and slower progress recognition at Twin Peaks. An interim dividend of 1.0 S-cent has been proposed. Maintain BUY with a lower fair value estimate of S$2.69 (20% discount to RNAV) as we incorporate softer residential assumptions.
2Q14 PATMI down 70% YoY to S$4.4m
OUE reported 2Q14 PATMI of S$4.4m, down 69.6% YoY due to lower contributions from Mandarin Gallery and Mandarin Orchard Singapore (now held through an equity interest in OUE Hospitality Trust), offset partially by lower finance expenses. 2Q14 topline declined 10.6% YoY to S$100.2m due to the absence of contributions from two Chinese hotels divested in Sep-13 and lower revenues from the Development Property division. Gross profit for the quarter similarly dipped 33.8% YoY to S$36.7m as cost of sales increased with the recognition of rental expense to OUE Hospitality Trust. Overall, we judge 2Q14 results to be marginally below expectations due to lower than anticipated gross margins and slower progress recognition at Twin Peaks. An interim dividend of 1.0 S-cent has been proposed.
Steady performances at both REITs
Overall portfolio occupancy at OUE Commercial REIT remained fairly healthy at 96.8% as at end Jun-14. OUE Bayfront remains 100% occupied as at 2Q14, with average passing rents for the office component increasing to S$10.66 psf from S$10.61 psf last quarter. Lippo Plaza saw its occupancy rate dip QoQ to 92.9% as at end Jun-14 from 95.9% due to some tenants not renewing their leases, though renewal rents in 2Q14 still showed a 4.3% increase versus preceding rents. At OUE Hospitality Trust, 2Q14 RevPAR at Mandarin Orchard was S$254, after adjusting for the lower available room inventory due to renovation – slightly below the forecast RevPAR of S$258, while Mandarin Gallery’s contribution was in line with forecast, with an effective rent per square foot per month of S$23.70.
Lower S$2.69 fair value estimate
Management reports that it has recently re-opened the retail mall at One Raffles Place and expects the asset to contribute positive to earnings ahead. Looking forward, management will focus on the execution of asset enhancement works at OUE Downtown. Maintain BUY with a lower fair value estimate of S$2.69 (20% discount to RNAV) as we incorporate softer residential assumptions.
OUE reported 2Q14 PATMI of S$4.4m, down 69.6% YoY due to lower contributions from Mandarin Gallery and Mandarin Orchard Singapore (now held through an equity interest in OUE Hospitality Trust), offset partially by lower finance expenses. 2Q14 topline declined 10.6% YoY to S$100.2m due to the absence of contributions from two Chinese hotels divested in Sep-13 and lower revenues from the Development Property division. Gross profit for the quarter similarly dipped 33.8% YoY to S$36.7m as cost of sales increased with the recognition of rental expense to OUE Hospitality Trust. Overall, we judge 2Q14 results to be marginally below expectations due to lower than anticipated gross margins and slower progress recognition at Twin Peaks. An interim dividend of 1.0 S-cent has been proposed.
Steady performances at both REITs
Overall portfolio occupancy at OUE Commercial REIT remained fairly healthy at 96.8% as at end Jun-14. OUE Bayfront remains 100% occupied as at 2Q14, with average passing rents for the office component increasing to S$10.66 psf from S$10.61 psf last quarter. Lippo Plaza saw its occupancy rate dip QoQ to 92.9% as at end Jun-14 from 95.9% due to some tenants not renewing their leases, though renewal rents in 2Q14 still showed a 4.3% increase versus preceding rents. At OUE Hospitality Trust, 2Q14 RevPAR at Mandarin Orchard was S$254, after adjusting for the lower available room inventory due to renovation – slightly below the forecast RevPAR of S$258, while Mandarin Gallery’s contribution was in line with forecast, with an effective rent per square foot per month of S$23.70.
Lower S$2.69 fair value estimate
Management reports that it has recently re-opened the retail mall at One Raffles Place and expects the asset to contribute positive to earnings ahead. Looking forward, management will focus on the execution of asset enhancement works at OUE Downtown. Maintain BUY with a lower fair value estimate of S$2.69 (20% discount to RNAV) as we incorporate softer residential assumptions.
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