OUE Hospitality Trust

OUE Hospitality Trust: 1Q14 distributable income of $22.1m and DPU of 1.68¢ were both 4.3% above IPO forecasts, driven by higher than expected master lease income from Mandarin Orchard Singapore and higher NPI achieved by Mandarin Gallery. Meanwhile, gross revenue of $28.7m and NPI of $25.6m topped forecasts by 1.4% and 2.7%. The master lease rental at Mandarin Orchard has a royalty component, which takes a percentage of revenue earned by the hotel in addition to the rental fees. For the quarter, a rise in corporate events contributed to higher F&B revenue, on top of the increased banquet sales. However, RevPAR of $248 was 3.5% below expectations due to the lower number of Indonesia guests around the Apr Parliamentary election period, although partially mitigated by higher demand from the corporate and wholesale segments. Gearing stood at 32.2% at an average cost of 2.2% and weighted average remaining tenor of 2.3 years. Occupancy stood at 100% with weighted average lease to expiry (by NLA) of 1.6 years. The refurbishment at Mandarin Orchard Singapore is on track for completion in phases in 2014 and 2015. At $0.875, OUE H Trust trades at 1Q14 annualized yield of 7.7% and 0.96x P/B, compared to hospitality peers' average of 6.9% and 0.97x P/B. Latest broker recommendations: Deutsche maintains Buy with $0.95 TP Standard Chartered maintains Outperform with $0.95 TP Credit Suisse maintains Outperform with $1.05 TP CIMB maintains Add with $0.96 TP