OUE Commercial REIT

OUE Commercial REIT: 1Q14 (27 Jan - 31 Mar) distribution income of $8.6m and DPU of 1¢ came above forecast by 4%, mainly driven by lower finance costs arising from a lower loan quantum outstanding. Meanwhile, gross revenue of $13.8m and NPI of $10.3m came 1% above forecast on improvements in occupancy rates and healthy rental reversions from both Lippo Plaza in Shanghai (+9%) and OUE Bayfront (+14%). Portfolio occupancy improved 2.6ppts q/q to 98.2%, with the office occupancy of OUE Bayfront at 100%- above core CBD occupancy rate of 95.7%, and WALE of 2.6 years (by NLA). Leasing momentum has been positive, with more than a third of the expiring leases in 2014 secured with positive rental reversion. OUE Commercial REIT has a relatively high leverage of 40.8%, with average cost of debt of 2.47% and average term to maturity for its debt of 3.65 years. Nothing much released on its acquisition pipeline in the near term. At $0.79, OUE Commercial REIT trades at 0.75x P/B and an unattractive 5.1% yield, compared to other office REIT peers' average of 0.87x P/B and 5.9% yield.