OCBC Report 13 Sep 13

OUE Hospitality Trust: The only pure Orchard Road play
OUE Hospitality Trust (OUEHT) is a stapled group consisting of OUE Hospitality Real Estate Investment Trust (OUE H-REIT), a REIT under which the initial portfolio is held, and OUE Hospitality Business Trust (OUE H-BT), a dormant business trust. The initial portfolio of OUE H-REIT comprises Orchard Road area’s largest hotel, the 1,051-room Mandarin Orchard Singapore (MOS) and the 196,336 sq ft GFA Mandarin Gallery (MG). These assets make OUEHT the only pure Orchard Road play in the REITs/Business Trust space. This initial portfolio has an aggregate value range of S$1,705m-S$1,756m, based on independent valuation estimates. Approximately 69% of the valuation is from MOS. The current oversupply situation in the Singapore hospitality sector is a known concern. Given this, we are pleased to note that MOS clocked 3.3% RevPAR growth for pro forma 1Q13. It is also worthwhile noting that 46.7% of MG’s leases by NLA have attractive step-up rental increases of 5.5% p.a., with only 20.7% of all leases by NLA expiring in FY13 and FY14. Based on a dividend discount model, we arrive at a fair value of S$0.94 for OUE Hospitality Trust and initiate our coverage with a BUY. (Sarah Ong)

MORE REPORTS

Suntec REIT: Unveils Suntec City’s new look
Suntec REIT announced yesterday that its major enhancement of Suntec City has reached a milestone with the opening of Phase 1 and Suntec Singapore. Management reported that Suntec Singapore has hosted 96 events and 650k visitors since opening in Jun 2013, affirming its status as an attractive Meetings, Incentives, Conventions and Exhibitions (MICE) destination, and expects a full calendar ahead for 2013 with customers like Spikes Asia, IFLA etc. The newly created retail space at Phase 1 now houses ~100 retail outlets and 50 F&B restaurants, including UNIQLO’s largest outlet in Singapore. We continue to believe that the outlook and valuation remains attractive for Suntec REIT. Maintain BUY with an unchanged fair value estimate of S$1.80. (Kevin Tan)

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NEWS HEADLINES

- US stocks declined on Thu, with the S&P 500 snapping its seven-session winning streak, as investors worried about development related to Syria and Federal Reserve policy moves.

- Indonesian businessmen Anthoni Salim and Putra Masagung have succeeded in their bid to take property and engineering group Guthrie GTS private.

- Sembcorp Marine announced yesterday that its subsidiary, Jurong Shipyard, has secured a US$346m contract to build a rig, putting it close to its rival, Keppel Offshore & Marine (O&M), in terms of new deals won this year.

- Cosco Corporation (Singapore)'s shipyard business has secured offshore and shipbuilding contracts totalling US$366m.

- See Hup Seng has entered a conditional agreement to buy Hetat Holdings, which primarily deals in designing, engineering and construction of steel, aluminium and glass structures, for S$42.4m.

- Singtel’s Optus Business has signed a A$530m (S$625m) deal with ANZ that will see the telco provide the banking group with telecommunications and managed services for another five years.