Company Update: OUE REIT (OUEREIT SP/TSOU.SI)
Company Update: 02 May 2025
Refocused, resilient and ready for growth
- Softer quarter on divestment and hospitality pullback. OUE REIT reported a YoY decline in revenue and NPI of 11.9% and 12.1% respectively for 1Q25. The lower figures reflect the absence of contributions from Lippo Plaza, following its divestment in December 2024, as well as a softer hospitality performance amid a more subdued trading environment compared to the previous year.
Tourism-led tailwinds
The Singapore Tourism Board projects international visitor arrivals to reach between 17 and 18.5 million in 2025, with tourism receipts forecasted at S$29.0bn – S$30.5bn. A robust line-up of leisure events, including Lady Gaga’s four-night concert in May and the Formula 1 Grand Prix, alongside other performances are expected to boost inbound travel, supporting demand for OUE REIT’s centrally located hotels and retail assets.
1Q25 financial update
OUE REIT delivered a stable performance in 1Q25, with revenue and net property income (NPI) declining by 11.9% and 12.1% YoY to S$66.0mn and S$53.2mn, respectively. These declines were largely due to the divestment of Lippo Plaza and lower contributions from the hospitality segment. On a like-for-like basis, revenue and NPI fell by a more modest 3.9% and 4.1% YoY, underscoring the resilience of its Singapore portfolio. Operational metrics remained robust, with office and retail occupancies at 96.3% and 99.5%, respectively, alongside healthy rental reversions of 9.9% (office) and 4.9% (retail).
Valuation & Action
We maintain an OUTPERFORM rating with an unchanged target price of S$0.318, based on a Dividend Discount Model (DDM) valuation, which assumes a terminal growth rate of 2.0% and a cost of equity of 9.0%. OUE REIT’s defensively positioned, Singapore-only portfolio, anchored by prime office, retail, and hospitality assets, continues to offer resilience amid macro uncertainty. With prudent capital management, attractive operating metrics, and growing optionality from available capital, OUE REIT is well-placed to deliver stable returns and pursue accretive opportunities.
Risks
Macroeconomic volatility, asset concentration, regulatory shifts and prolonged high interest rates.
