OUE HT suffers from less Indonesian visitors in 3Q

Success is hinging on Mandarin Gallery’s momentum.

Weaker visitor arrivals from Indonesia and the strong SGD have resulted in lower revenue per available room for OUE HT.

In a report by OCBC, gross revenue came in at S$28.5m and was 0.7% higher than its forecast. DPU of 1.64 S cents was 2.5% above its 1.6 S cents projection. For 9M14, revenue and DPU of S$85.5m and 4.96 S cents was 0.7% and 3.1% above OUEHT’s forecast.

OUEHT managed to achieve a RevPAR of S$252 in 3Q14, versus its S$248 forecast, due to the completion of its Mandarin Orchard Singapore (MOS)renovation and higher guests’ contribution from the corporate business segment.

However, this was still lower than the S$261 RevPAR attained in 3Q13 (after adjusting for the shorter financial period since it was listed on 25 Jul 2013). This can be attributed to the weaker visitor arrivals from Indonesia as a result of the presidential elections and strong SGD. Indonesians form ~25%-30% of OUEHT’s room nights occupied.

Here’s more from OCBC:

Despite headwinds facing Singapore’s hospitality sector, we believe OUEHT’s defensive long-term master lease for MOS would provide a buffer to unitholders given its downside protection structure. Mandarin Gallery’s (MG) momentum is also likely to remain robust, as we expect continued positive rental reversions going into 2015. Both tenants’ sales and footfall at MG rose 5% YoY in 3Q14 despite the challenging retail scene in Singapore. In terms of balance sheet strength, OUEHT’s gearing stands healthy at 32.7%, with an average cost of debt of 2.2%. 100% of its debt has also been fixed via interest rate swaps.

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