OUE Hospitality Trust's net property income up 4.3% to $27.4m

Thanks to contributions from Mandarin Gallery.

OUE Hospitality Trust's reported healthy numbers for the quarter ending in March, with both head and bottom lines registering uptrends.

According to OCBC Investment Research, the trust's revenue increased 6.4% to $32.1m whilst its net property income jumped 4.3% to $27.4m.

The bulk of its NPI came from Mandarin Gallery, whose retail NPI increased 17.6% YoY to $6.4m whilst hospitality NPI increased 0.9% YoY to $21.0m.

"We note that the average occupancy rate at MG is 94.7%, up
11.8 ppt from 1Q16. This more than compensated for the 2.8% lower effective rent of $23.7 psf per month," the brokerage firm said.

Here's more from OCBC Investment Research:

Additional master lease income of S$1.6m from CPCA offset the S$0.6m lower contribution from Mandarin Orchard Singapore (MOS). We note that MOS’s 1Q17 RevPAR dropped 2.3% YoY to $217, due to lower rates despite the higher occupancy.

As a comparison, CDLHT’s RevPAR for its Singapore hotels dropped 0.8% YoY in 1Q17. MOS’s lower room sales were partially compensated by higher F&B revenue.

As we noted in other reports recently, we expect a significant supply injection in 2Q17 with ~2.8k rooms expected to come on-stream. In contrast, the hotel room supply is estimated to have increased by only ~130 rooms in 1Q17.

Despite these headwinds, we remain optimistic on OUEHT given the positive contributions from the recovery in contributions from Mandarin Gallery and the stabilizing effect of the enlarged CPCA. In addition, we note that the renovation of 430 rooms of MOS has completed and expect this to help OUEHT command better rates.