OUE-CT reported 3Q14 distributable income and DPU of S$12.2m and 1.40 S-cents, respectively, which are 3.2% and 2.9% ahead of the IPO Forecasts and broadly in line with our expectations. In addition, 3Q14 gross revenue of S$19.5m was 1.8% ahead of the IPO Forecast, while the NPI of S$14.9m for the quarter also exceeded the Forecast by 6.3%. Overall portfolio occupancy improved to 97.2% as at end 3Q14, versus 96.8% as at end 2Q14, and management indicates that they have seen positive rental reversions at both portfolio assets, OUE Bayfront and Lippo Plaza, over the quarter. We understand that the REIT manager is currently focused on proactive leasing and cost management. For instance, we note that the REIT had incurred lower utilities expenses in 3Q14 following cost-saving initiatives to purchase OUE Bayfront’s utility consumption in bulk. Looking ahead, any future acquisitions of pipeline assets will likely come in FY15 and after. Maintain BUY with an unchanged fair value estimate of S$0.88.
3Q14 figures broadly in line
OUE-CT reported 3Q14 distributable income and DPU of S$12.2m and 1.40 S-cents, respectively, which are 3.2% and 2.9% ahead of the IPO Forecasts and broadly in line with our expectations. In addition, 3Q14 gross revenue of S$19.5m was 1.8% ahead of the IPO Forecast, while the NPI of S$14.9m for the quarter also exceeded the Forecast by 6.3%. Overall portfolio occupancy improved to 97.2% as at end 3Q14, versus 96.8% as at end 2Q14, and management indicates that they have seen positive rental reversions at both portfolio assets, OUE Bayfront and Lippo Plaza, over the quarter. OUE Bayfront remains 100% occupied as at end 3Q14, with average passing rents for the office component increasing to S$10.68 psf from S$10.66 psf last quarter. Management reports that newly committed rents for OUE Bayfront over 3Q14 ranged from S$12.50 to S$15.20 psf which is, on average, 10.2% higher than preceding rentals. Lippo Plaza had its occupancy rate improve to 94.4% as at end 3Q14 from 93.6% last quarter and similarly saw renewal rents in 3Q14 increase 5.6% versus preceding rents.
Maintain BUY with FV estimate of S$0.88
OUE-CT’s aggregate leverage increased slightly to 39.8% (versus 39.5% as at end Jun-14) while average cost of debt dipped marginally to 2.57%. We understand that the REIT manager is currently focused on proactive leasing and cost management. For instance, we note that the REIT had incurred lower utilities expenses in 3Q14 following cost-saving initiatives to purchase OUE Bayfront’s utility consumption in bulk. Looking ahead, any future acquisitions of pipeline assets will likely come in FY15 and after. We believe OUE-CT represents attractive relative value versus its office S-REIT peers; despite providing one of largest exposure to the premium office space in Singapore, OUE-CT offers a consensus forward yield of 7.0% - the third highest in its peer group (average: 6.5%). Its price-to-book ratio of 0.74 is also lowest amongst peers. Maintain BUY with an unchanged fair value estimate of S$0.88.
OUE-CT reported 3Q14 distributable income and DPU of S$12.2m and 1.40 S-cents, respectively, which are 3.2% and 2.9% ahead of the IPO Forecasts and broadly in line with our expectations. In addition, 3Q14 gross revenue of S$19.5m was 1.8% ahead of the IPO Forecast, while the NPI of S$14.9m for the quarter also exceeded the Forecast by 6.3%. Overall portfolio occupancy improved to 97.2% as at end 3Q14, versus 96.8% as at end 2Q14, and management indicates that they have seen positive rental reversions at both portfolio assets, OUE Bayfront and Lippo Plaza, over the quarter. OUE Bayfront remains 100% occupied as at end 3Q14, with average passing rents for the office component increasing to S$10.68 psf from S$10.66 psf last quarter. Management reports that newly committed rents for OUE Bayfront over 3Q14 ranged from S$12.50 to S$15.20 psf which is, on average, 10.2% higher than preceding rentals. Lippo Plaza had its occupancy rate improve to 94.4% as at end 3Q14 from 93.6% last quarter and similarly saw renewal rents in 3Q14 increase 5.6% versus preceding rents.
Maintain BUY with FV estimate of S$0.88
OUE-CT’s aggregate leverage increased slightly to 39.8% (versus 39.5% as at end Jun-14) while average cost of debt dipped marginally to 2.57%. We understand that the REIT manager is currently focused on proactive leasing and cost management. For instance, we note that the REIT had incurred lower utilities expenses in 3Q14 following cost-saving initiatives to purchase OUE Bayfront’s utility consumption in bulk. Looking ahead, any future acquisitions of pipeline assets will likely come in FY15 and after. We believe OUE-CT represents attractive relative value versus its office S-REIT peers; despite providing one of largest exposure to the premium office space in Singapore, OUE-CT offers a consensus forward yield of 7.0% - the third highest in its peer group (average: 6.5%). Its price-to-book ratio of 0.74 is also lowest amongst peers. Maintain BUY with an unchanged fair value estimate of S$0.88.
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