FY21 Results Analysis: Hilton Singapore Orchard ready for further ease of travel
- FY21 DPU +7% y-o-y to 2.60 Scts, above, led by release of retained distribution and partial capital distribution.
- Key positive: i) lower rental rebates extended despite extended restrictions, ii) tenant sales improved to c.75% in Dec21, iii) strong RevPAR improvement with relaxation of travel
- Key negatives: i) occupancy decline in both office and retail portfolio, ii) retail occupancy declined further, iii) RevPAR fell q-o-q
- Maintain BUY; TP of S$0.50. While operational metrics appears mixed, OUECT is poised to gain from the further relaxation of travel and COVID-19 measures just announced.
| Summary of results (S$’m) | 4Q2021 | 3Q2021 | %q-o-q | 4Q2020 | % y-o-y | FY2021 | FY2020 | % y-o-y |
| Revenue | 57.8 | 58.5 | -1% | 79.1 | -26.9% | 249.9 | 292.0 | -14% |
| NPI | 49.0 | 46.2 | 6% | 63.6 | -23.0% | 204.2 | 231.9 | -12% |
| Share of JV results | 5.2 | 4.0 | 13.2 | |||||
| DI | 44.6 | 30.2 | 48% | 44.2 | 0.9% | 142.0 | 132.8 | 7% |
| DPU * | 0.82 | 0.56 | 47% | 0.80 | 2.1% | 2.60 | 2.43 | 7% |
| Gearing | 38.7% | 38.4% | 0.3 ppt | 41.2% | -2.5 ppt | 0 ppt | ||
| Average cost of debt | 3.20% | 3.20% | 0 ppt | 3.00% | 0.2 ppt | 0 ppt | ||
| ICR | 2.7 | 2.8 | (0.1) | 2.7 | – | – |
* * estimated quarterly DPU
Source: Company, DBS
FY21 results included S$10.4m of additional distributions; S$1.2m rental rebates were extended in 4Q21, which is progressively lower.
- FY21 DPU +7% y-o-y to 2.60 Scts, above our estimates. In FY21, distributions included the release of S$5m of distribution retained in FY20 and S$5.4m partial distribution of divestment gain from OUE Bayfront (total earmarked capital distribution of S$15m) Excluding the additional distributions, we estimate that FY21 DPU would have reduced by c.9% y-o-y mainly due to the divestment of 50% stake in OUE Bayfront which was completed end Mar21.
- 4Q21 estimated DPU +2.1% y-o-y to 0.82 Scts, mainly due to the additional distributions offset by the divestment of 50% stake in OUE Bayfront. On q-o-q, 4Q21 estimated DPU increased by 47% but excluding additional distributions, DPU would have decreased by 23% y-o-y following the divestment.
- Similarly, 4Q21 revenue and NPI fell 27% q-o-q and 23% q-o-q to S$58m and S$49m respectively, mainly due to the contribution from OUE Bayfront which will be recognised as share of JV results following the partial divestment of OUE Bayfront. On q-o-q, 3Q21 revenue and NPI fell 1% but improved 6% respectively.
- Following the extended restrictions, approximately S$1.2m of rental rebates were extended to retail tenants in 4Q21 (S$1.1m in 3Q21). FY21 rental rebates were S$8.5m with only S$2.3m were paid out in 2H21 (quantum is progressively lower).
- Gearing and average cost of debt were relatively stable q-o-q at 39% and 3.2%.
- NAV remained stable q-o-q at S$0.57 (vs S$0.59 as at Dec20). Portfolio valuation declined 7.8% y-o-y mainly from retail and hospitality assets. Office assets valuation improved driven by tighter capitalisation by 10 to 20 bps.
Key highlights
| Key Operational Data | 4Q2021 | 3Q2021 | %q-o-q | 4Q2020 | % y-o-y |
| Portfolio occupancies* | 89.6% | 90.0% | -0.4 ppt | 92.5% | -2.9 ppt |
| – Office* | 92.5% | 92.6% | -0.1 ppt | 92.7% | -0.2 ppt |
| – Retail | 86.7% | 87.4% | -0.7 ppt | 91.1% | -4.4 ppt |
| WALE (years) | 3.50 | 3.50 | 0.0 | 3.40 | -3.4 |
| – Office | 2.40 | 2.40 | 0.0 | 2.30 | -2.3 |
| – Retail | 2.20 | 2.50 | -0.3 | 2.50 | -2.8 |
| Av signing rents | |||||
| – SG (S$) | 7.50 to 15.00 | 7.60 to 11.60 | n/a | 7.50 to 12.90 | n/a |
| – CN (RMB) | 8.10 to 11.00 | 7.30 to 9.52 | n/a | 8.25 to 9.10 | n/a |
| Lease expiries/Rent Reviews in FY2022 by Gross Rent | 22.5% | 26.5% | -4 ppt | 20.9% | 1.6 ppt |
| – Office | 13.3% | 17.8% | -4.5 ppt | 26.8% | -13.5 ppt |
| – Retail | 3.4% | 3.4% | 0 ppt | 20.5% | -17.1 ppt |
| Lease expiries/Rent Reviews in FY2023 by Gross Rent | 22.0% | 22.2% | -0.2 ppt | 17.4% | 4.6 ppt |
| – Office | 11.9% | 13.5% | -1.6 ppt | 22.2% | -10.3 ppt |
| – Retail | 4.4% | 4.2% | 0.2 ppt | 24.0% | -19.6 ppt |
| Rental Reversions | -5.0% to 9.5% | -5.2% | n/a | -0.8% to 19.3% | n/a |
| Revpar (S$) | 113 | 92 | 23% | 95 | 18.9% |
*4Q21 portfolio / office occupancy are simple average
Source: Company, DBS
(-) Portfolio occupancy declined to 89.6%; retail occupancy continue on a downward trend to 86.7% and shorter term retail leases increased.
- Estimated portfolio occupancy fell marginally by 0.4ppt q-o-q to 89.6%.
- Singapore office portfolio saw some decline in occupancies q-o-q where both ORP and OUE Downtown saw occupancies fell to marginally below 90% (88.3% and 88.6% respectively). Lippo Plaza saw occupancy improved further by 2.9ppt q-o-q to 92.9%.
- Mandarin Gallery occupancy fell further by 0.7ppt q-o-q to 86.7%. Occupancy including the shorter-term leases improved to 94.3% vs 93.3% in 3Q21.
(-) 4Q21 rental reversions were -5% to 9.5%; Singapore office rents stable while Lippo Plaza signed higher rents.
- 4Q21 rental reversions recorded -5% to 9.5%. Singapore office rents appears to be stable while signing rents at Lippo Plaza seems to have improved.
- Rental rebates extended to its retail tenants were stable q-o-q at S$1.2m vs S$1.1m in 3Q21, but lower compared to previous quarters.
(+) Tenant sales and shopper traffic improved to c.75% and c.65% of pre-COVID levels respectively
- In Dec21, shopper traffic and tenant sales have improved to c.75% and c.65% of pre-COVID levels respectively, vs 70% and 60% respectively in 3Q21.
(+) RevPAR improved with relaxation of travel borders and various VTL arrangements; Hilton Singapore Orchard relaunch soon to ride on further border relaxation
- 4Q21 Portfolio RevPAR improved 23% q-o-q to S$113.
- MOS RevPAR improved 44% q-o-q to S$97 buoyed by local staycation demand during the year-end holiday period.
- CPCA RevPAR improved 13% q-o-q to S$125 led by more travel with the relaxation of travel borders and various VTL arrangements.
- The relaunch of Hilton Singapore Orchard is targeted on 1 Mar 2022, well-timed to ride on further border relaxation just announced.
Maintain BUY; TP of S$0.50. Despite operational metrics in 3Q21 appears mixed, we believe OUECT is poised to ride on potential recovery in “new normal” and relaxation of travel borders. OUECT currently trades at 0.75x P/NAV and c.6% FY22F yield.
More details after the briefing.
We are hosting OUECT for its post results investor call today, Thursday, 17 Feb @ 2.30pm.