OUE’s FY14 revenue of $71.5m falls short of analyst expectations

Due to a weaker than anticipated contribution from Lippo Plaza.

OUE Commercial REIT’s FY14 results seem fine, but it has to up its game with Lippo Plaza in case costs become unmanageable.

According to a report by OCBC, FY14 (27 Jan 2014 to 31 Dec 2014) NPI of S$53.8m and distribution income of S$45.9m constitute 100.6% and 97.7% of OCBC’s forecasts, respectively.

In terms of the topline, FY14 gross revenue of S$71.5m was 3.6% ahead of the IPO forecast but was marginally below expectations (only 96.7% of our forecast) due to a weaker than anticipated contribution from Lippo Plaza. This was negated through effective cost controls by the REIT manager which brought the NPI line back within expectations.

Here’s more from OCBC:

Overall portfolio occupancy was firm at 98.0% as at end Dec-14, up QoQ versus 97.2% as at end Sep-14. 19.8% of the portfolio, by gross rental income, is up for renewal in 2015 and management expects overall occupancy rates to stay in the healthy mid-90% range over the year ahead. OUE Bayfront remained 100% occupied as at end 4Q14, with average passing rents increasing from S$10.40 psf at IPO to S$10.58 psf.

Newly committed rents over FY14 for OUE Bayfront ranged from S$11.22 to S$15.50 psf which is, on average, 14.9% higher than preceding rentals. Lippo Plaza’s occupancy rate increased QoQ to 96.0% as at end Dec-14 from 94.4% as at end Sep-14, and renewal rents in FY14 also showed a respectable 6.0% increase versus preceding rents. Looking ahead, management expects positive rental reversion at Lippo Plaza to continue at a 3.0%-5.0% rate.