OUE Hospitality Trust

OUE Hospitality Trust: OUE Hospitality Trust 3Q14 distributable income and DPU of $21.7m and 1.64¢ beat IPO forecasts by 2.7% and 2.5% respectively, as a result of higher-than-expected gross revenue of $28.5m (+0.7%) and NPI of $25.4m (+1.6%), from increased income contributions from Mandarin Orchard Singapore (MO) and Mandarin Gallery (MG), as well as lower utilities and property tax expenses. MO's RevPAR grew 4% q/q to $252 and 1.6% higher than forecasted, after completion of renovation works, higher income generated from the corporate business segment and increased patronage from the F&B segment. MG's occupancy remained healthy at 99.7%, while effective rental rate saw a marginal increase to $23.90 psf pm (+0.8%). With 2% of NLA, or 4% of revenue, still up for renewal in FY14, this should portend to some upside if rental reversion maintains at 4.7%, achieved in the quarter. Aggregate leverage for the trust maintained at 32.7%, with cost of debt at 2.2% and average debt tenor of 1.8 years. While management expects hotel rates to remain competitive in light of the new supply, it remains sanguine on demand at MO and MG due to its prime location, underpinned by Singapore Tourist Board's initiatives to promote Orchard Road as a vibrant lifestyle destination. Key catalyst remains the acquisition of Crowne Plaza Changi Airport from its sponsor. At $0.915, OUE Hospitality Trust is trading at 1x P/B and 7.4% estimated FY14 yield, compared to SGX-listed hospitality peers of 0.96x and 6.7% yield. Latest broker ratings: CIMB maintains Add with TP of $0.96 Deutsche maintains Hold with TP of $0.92 OCBC maintains Hold with TP of $0.85