CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei have maintained their “hold” call on OUE Commercial REIT (OUE C-REIT) with a lower target price of 41.5 cents from 48.5 cents on a mixed performance from the REIT.
OUE C-REIT reported distribution per unit (DPU) of 1.43 cents for the 2HFY2020 ended December and 2.43 cents for the FY2020, which came in slightly below the analysts’ expectations at 92.4% of their forecast.
The analysts also noted that REIT’s office segment continued to perform well at a stable committed portfolio occupancy of 92.5% as at end December 2020, with its hospitality segment underpinned by master lease arrangements.
That said, Lock and Eing foresee that the REIT may use its net proceeds from the divestment of its 50% stake in OUE Bayfront, OUE Tower and OUE Link to repay debt.
This, they say, could reduce its proforma gearing by 6.7 percentage points to 33.6%.
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On this, Lock and Eing have also reduced their DPU estimates for FY2021 and FY2022 by 4% and 12.1% respectively, which takes into account the divestment, absence of capital recycling and a “more modest hospitality segment recovery”.
OCBC Investment Research (OIR) analyst Chu Peng has, similarly, rated OUE C-REIT at “hold”.
Unlike the analysts at CGS, Chu has increased her fair value estimate to 40 cents from 39 cents
The increase is mainly due to the REIT’s divestment of its 50% interest in OUE Bayfront, OUE Tower and OUE Link.
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“Management sees this as an opportunity to optimise capital structure while maintaining exposure to Singapore office market,” she says.
The REIT’s FY2020 results came in within Chu’s expectations, and she sees stronger-than-expected growth in leisure demand for hotels and DPU accretive acquisitions as potential catalysts for the REIT.
As at 12.55pm, units in OUE C-REIT are trading 1 cent lower or 2.6% down at 37.5 cents.
