10 Things You Must Know About OUE Hospitality Trust

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OUE Hospitality Trust (OUE H-Trust) invests in hospitality based properties in Singapore. It was listed on 25 July 2013 with an initial portfolio of 2 assets: Mandarin Orchard Singapore and Mandarin Gallery. Both assets are located at Orchard Road, the shopping district of Singapore. Subsequently, in 2015, it has completed its acquisition of Crowne Plaza Changi Airport, enlarging its portfolio to 3 properties. As at 31 December 2016, OUE H-Trust’s portfolio of properties were valued at S$ 2.21 billion.

In this article, I’ll list down 10 quick facts that you need to know about OUE H-Trust before you invest:

#1: Stock Symbol

Ticker Symbol: SGX: SK7
Market Capitalization: S$ 1.59 Billion (13 January 2018)

Share Price: S$ 0.88 (13 January 2018)

Industry: Reit

#2: The Business

Here are the details of properties owned by OUE H-Trust:

  1. Mandarin Orchard Singapore
    Mandarin Orchard Singapore is a hotel that features 1,077 rooms, 5 F&B outlets, and over 30,000 sq. ft. of meeting and function spaces located at the heart of Orchard Road. In 2016, it was valued at S$ 1.2 billion, accounting for 54.8% of the value of its portfolio. During the year, it has contributed S$ 71.7 million in gross revenue to the trust.
  2. Crowne Plaza Changi Airport (CPCA)
    CPCA is a 563-room business hotel managed by the InterContinental Hotels Group. OUE H-Trust has acquired CPCA in two phases. First, it acquired 320-room CPCA in January 2015. Subsequently, the trust bought 243-room CPCA extension when it was completed in August 2016. As at 31 December 2016, CPCA was valued at S$ 496.6 million, accounting for 22.5% of the value of its portfolio. During the year, it has contributed S$ 18.2 million in gross revenue to OUE H-Trust.
  3. Mandarin Gallery
    Mandarin Gallery is a high-end retail mall situated within 4 levels of Mandarin Orchard Singapore. In 2016, the mall was valued at S$ 501 million, accounting for 22.7% of the value of its portfolio. During the year, it has contributed S$ 32.6 million in gross revenue to the trust.

#3: The Financials

From 2014 to 2016, OUE H-Trust has generated S$ 115 – 125 million a year in gross revenue. From which, it has maintained its net property income (NPI) at S$ 100 – 110 million a year. Distributable income has dropped marginally from S$ 89.0 million in 2014 to S$ 82.5 million in 2016. This is due to slight increment in finance expenses in 2016. After adjusted for the issuance of rights shares, OUE H-Trust’s distributions per unit (DPU) has dropped marginally from 4.97 cents in 2014 to 4.61 cents in 2016.

Source: Annual Reports of OUE H-Trust

Source: Annual Reports of OUE H-Trust

#4: Major Acquisitions

There is no major acquisition or disposal announced by OUE Hospitality Trust.

#5: Sponsor Strength

OUE Ltd is the sponsor of OUE H-Trust. Presently, OUE H-Trust has been granted Rights of First Refusal (ROFR) to two hospitality based properties. This includes Meritus Mandarin Haikou and Meritus Shantou China. Both hotels have 318 rooms each and are located in China.

#6: Lease Expiry

OUE H-Trust derives income from two master lease agreements:

  1. Mandarin Orchard Singapore
    The master lessee is OUE Ltd. The tenure of this agreement is for 15 years where it will expire in July 2028. It has an option for renewal for an addition of 15 years. The variable rent consists the sum of 33% of Gross Operating Revenue and 27.5% of Gross Operating Profits. It is subject to a minimum rent of S$ 45 million per annum.

  2. Crowne Plaza Changi Airport
    The master lessee is OUE Airport Hotel Pte Ltd. The tenure of this agreement is for 15 years where it will expire in May 2028. It has an option to be renewed for two consecutive terms with 5 years for each term upon expiry. The variable rent consists the sum of 4% of Hotel F&B revenues, 33% of Hotel Rooms & other revenues not related to F&B, 30% of Gross Operating Profits and 80% of Gross Rental Income from leased spaces. It is subject to a minimum rent of S$ 22.5 million per annum.

  3. Mandarin Gallery
    As at 31 December 2016, Mandarin Gallery has a weighted average lease expiry of 4.0 years by gross rent. 48% of its leases would start to expire in the financial year 2020 and beyond. As at 30 September 2017, the mall has increased its occupancy rate to 96.4%, up from 86.3% in December 2016. It has contributed higher revenues and net property income to Mandarin Gallery in the 9-month period in 2017 against the 9-month period in 2016.

Source: Annual Report 2016 of OUE H-Trust

#7: Valuation

As I write, OUE H-Trust is trading at S$ 0.88 a unit.

As at 30 September 2017, OUE H-Trust has reported having S$ 0.76 in net asset value a unit. Thus, its current P/NAV works out to be 1.16.

OUE H-Trust adopts a distribution policy to declare and pays out at least 90% of its distributable income on a quarterly basis. Over the last 12 months, the trust has paid out 5.23 cents in DPU. If it is able to maintain its DPU at 5.23 sen for the next 4 quarters, its gross dividend yield is expected to be 5.94%.

#8: Debt Profile

As at 30 September 2017, OUE H-Trust has total debt of S$ 855.5 million. It works out to be a gearing ratio of 38.0%. The average cost of debt is 2.8%.

#9: Investor Relations

For further enquiries or to request for additional investment information on OUE H-Trust’s Investors Relation matters, you may contact:

Goh Lilian
Senior Vice President, Investors Relation

Telephone: +65 6831 6345

Email: lilian.goh@oueht.com

Website: https://oueht.com/contact

#10: Major Shareholders

As at 21 January 2017, the 4 largest direct shareholders of OUE H-Trust are:

– OUE Limited: 32.55% (Direct Shareholdings)

– Tang Gordon @ Tang Yigang: 4.80% (Direct Shareholdings)

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Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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