OUEHT

OUEHT: Against forecast, 2QFY14 DPU was 2.5% higher at 1.64¢, while distributable income was 2.3% higher at $21.6m. Revenue was in line at $28.3 while NPI was 1.2% higher than forecast at $25.2m as F&B outperformance offset lower RevPAR ($242 vs forecast of $258) as renovations were accelerated to capitalized seasonally higher demand in 2H. Offsetting effects of renovations, RevPAR would have been $254 instead. Aggregate leverage stood at 32.7% with average cost of debt of 2.2%. Mandarin Gallery’s occupancy is 99.7% with WALE of 1.66 years. Although SG retail segment is experiencing headwinds, Mandarin Gallery is expected to enjoy fixed income as 98% of rentals are fixed. Mandarin Orchard is poised to do well in 2H, with new rooms in a prime area. Premium hotels are expected to perform better than mid-range hotels as the former suffers less competition, amid a busier tourist calendar and recovery in business travelling this year. Key catalyst ahead is the acquisition of Crowne Plaza Changi Airport asset from sponsor. NAV at end Jun was $0.90, translating to 1x P/B. annualized 2Q14 DPU yield is 7.3%. Latest broker ratings: Deutsche maintains Buy with TP of $0.95 Maybank-KE maintains Buy with TP of $0.93