A mixed quarter
? 1Q22 revenue/NPI slightly below, at 23.8%/24.2% of our FY22F forecasts.
? Focus on improving commercial occupancy; Hilton Singapore Orchard
commenced operations in Feb 2022.
? Reiterate Hold with a lower DDM-based TP of S$0.43.
1Q22 business update
OUECT reported 1Q22 gross revenue/NPI of S$59.5m/S$48m, -20.3%/-21.5% yoy, due to
the deconsolidation of OUE Bayfront (OUEBF) contributions to a share of JV results, partly
mitigated by lower rental rebates and property expenses. Income available for distribution
was down a smaller 15.8% yoy to S$31.2m, including the drawdown of income support at
OUE Downtown Office and lower interest expense. Gearing stood at 39.4% as at end1Q22. Average cost of debt lower at 3%; some 70% of its debt hedged into fixed rates.
Commercial segment performance was mixed
1Q22 commercial NPI dipped 29.5% yoy to S$32.2m due to deconsolidation of OUEBF,
partly offset by lower rental rebates of S$1.1m extended to retail tenants. Committed office
portfolio occupancy dipped qoq to 91.2% at end-1Q22. Committed occupancy at OUEBF
and One Raffles Place (ORP) remained at 99.3%/88.2% while take up at OUE Downtown
Office declined to 87.8%. Occupancy at Lippo Plaza was stable at 91.6%. Meanwhile, its
Singapore office properties renewed leases at -5.9% to +2.5% rental reversions in 1Q.
OUECT has 16.9%/22.9% of commercial rental income to be renewed in 9MFY22-FY23F,
mainly from ORP and OUE Downtown. Mandarin Gallery’s (MG) passing rent dipped 0.3%
qoq to S$20.81 psf/mth. However, committed occupancy increased 2% pt to 88.7% at end
1Q22 (including short term leases, committed occupancy was 95.4%). Shopper traffic/
tenant sales at MG are c.80% of pre-Covid-19 levels. Management indicated it would
continue to focus on improving occupancies at its weaker performing properties.
Hospitality RevPAR improved qoq in 1Q22
The hospitality segment reported flat qoq revenue of S$16.9m in 1Q22, supported by the
minimum rent under the master lease agreement, while NPI grew 2% to S$15.7m. Overall,
1Q22 RevPAR was up 0.3% qoq to S$113. The Mandarin Orchard Singapore (MOS) was
relaunched as Hilton Singapore Orchard (HSO) in Feb 2022, with refurbished rooms and
suites, new and enhanced MICE facilities and revamped and fresh F&B offerings. RevPAR
improved 2.1% qoq to S$99. Meanwhile, Crowne Plaza Changi Airport reopened to service
the air crew and aviation segment in 1Q. RevPAR inched up 0.7% qoq to S$126.
Management guided that as HSO continues to ramp up with more rooms to be opened in
2H, the fixed component of its master lease will provide some income stability.
Reiterate Hold rating
We tweak down our FY22-24F DPU estimates by 1.01-2.84% on lower occupancy at OUE
Downtown and lower our DDM-based TP to S$0.43. Potential upside risks include
redeployment of divestment proceeds into higher yielding assets in developed markets and
faster-than-expected recovery in the hospitality segment. Downside risks include a slowerthan-anticipated recovery from Covid-19.