- 1H26 gross revenue/NPI rose 3.8%/4.8% YoY to S$136.1mn/S$110.3mn, forming 50%/51% of our FY26e forecast. 1H26 DPU increased 28.6% YoY to 1.26 cents, exceeding our expectations and forming 55% of our FY26e forecast. The results were driven by strong hospitality segment performance, lower financing costs (-16.6% YoY), and contribution from the Salesforce Tower associate.
- The hospitality segment revenue increased 11.2% YoY to S$50.1mn, whereas NPI increased 12.3% YoY to S$45.1mn. Hospitality segment RevPAR was up 10.7% to S$258 in 1H26, driven by proactive commercial execution at Hilton Singapore Orchard (corporate account wins, group business growth) and rising transit passenger volumes at Crowne Plaza Changi Airport.
- We maintain BUY with unchanged DDM-based TP of S$0.45. We removed Crowne Plaza earnings contribution from FY27e onwards, and accounted for the S$20mn special distribution over FY27e and FY28e. FY27e and FY28e DPU forecast is increased by 3.8% and 3.2% respectively. OUE REIT is trading at a FY26e dividend yield of 6.2%, and a P/NAV of 0.57x. We expect upside from the i) accretive redeployment of divestment proceeds into Salesforce Tower (current stake: 19.9%), ii) successful backfilling of Deloitte’s space at OUE Downtown (150,000 sqft) at market rents, and iii) continued cost savings as OUE REIT refinances its 2027 debt maturities.
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