9 Quick Things Investors Should Know About OUE Hospitality Trust’s Latest Earnings
In late January, OUE Hospitality Trust (SGX: SK7) released its 2017 fourth quarter and full year earnings update.
As a quick introduction, OUE Hospitality Trust is a stapled trust that consists of a real estate investment trust and a business trust. The trust invests primarily in hospitality-related properties. Its portfolio currently consists of the Crown Plaza Changi Airport hotel, and the connected Mandarin Orchard Singapore hotel and Mandarin Gallery high-end retail mall. All three properties are located in Singapore.
Here are nine things investors should know about OUE Hospitality Trust’s latest results:
1. Gross revenue for the reporting quarter improved by 1.8% year-on-year to S$33.81 million, but net property income declined by 1.1% to S$29.23 million.
2. Distribution per stapled security (DPS) was also down by 6.6% year-on-year to 1.27 cents.
3. Based on OUE Hospitality Trust’s 2017 total DPU of 5.14 cents, and its closing unit price of S$0.835 as of 13 February 2018, the trust has a trailing distribution yield of 6.2%.
4. As of 31 December 2017, the trust’s gearing stood at 38.8%, which is cutting a little close to the regulatory gearing ceiling of 45%.
5. Mandarin Gallery had a committed occupancy rate of 96.4% at end-2017.
6. Mandarin Gallery’s weighted average lease expiry (by gross rent) was at 3.8 years as of 31 December 2017.
7. In the reporting quarter, Mandarin Gallery’s average rental reversion rate was 3.8%.
8. Both Mandarin Orchard Singapore and Crowne Plaza Changi Airport reported higher revenue per available room (RevPAR) in the reporting quarter. For Mandarin Orchard Singapore, its RevPAR increased from S$220 in 2016’s fourth quarter to S$225; Crowne Plaza Changi Airport’s RevPAR did even better with a significant increase from S$133 to S$176 over the same period.
9. In its earnings release, OUE Hospitality Trust gave some commentary on its outlook:
“In the tourism sector, Singapore Tourism Board (“STB”) reported a 6.4% year-on-year increase in international visitor arrivals in the first eleven months of 2017. The number of visitor days had also increased by 4.6%. Changi Airport’s Terminal 4 commenced operations on 31 October 2017 and on 18 December, Changi Airport recorded its 60th million passenger within a calendar year for the first time.
In 2018, the return of large biennial events, such as the Singapore Airshow and Food & Hotel Asia, are expected to increase demand for hotel accommodation. New supply in 2018 is expected to be lower but the market has to absorb the additional rooms that came on stream in the second half of 2017. As such, the market environment remains competitive.
Challenges in Singapore’s retail scene remain, with tenants more cautious and taking a longer time to renew or commit to leases. Whilst we continue to explore leasing opportunities to optimise the occupancy of Mandarin Gallery, we remain committed to curating the right tenant mix to retain the mall’s positioning as a destination mall”