OUE REIT – Hospitality and office lead growth amid lower financing costs April 23, 2026 27

PSR Recommendation: BUY Status: Maintained
Last Close Price: 1.11 Target Price: 0.45
  • 1Q26 gross revenue/NPI rose 6.7%/8.4% YoY to S$70.5mn/S$57.6mn, forming 26%/26% of our full year forecasts. The results were driven by strong performance in the hospitality segment and a decline in financing costs due to reduced interest rates and loan repayments.
  • The hospitality segment revenue increased 15.1% YoY to S$26.8mn, whereas NPI increased 16.8% YoY to S$24.3mn. Hospitality segment RevPAR was up 11.7% to S$277 in 1Q26. The improvement was driven by a strong MICE pipeline in 1Q26, and proactive execution by focusing on corporate travellers and providing flexible pricing for guests.
  • We maintain BUY with unchanged DDM-based TP of S$0.45. Earnings contribution from Salesforce Tower has been accounted for, and FY26e financing costs have been reduced by c. 3%. FY26e DPU estimate is increased incrementally by 1% to 2.26 cents. OUE REIT is trading at a FY26e dividend yield of 6.2%, and a P/NAV of 0.65x. We expect upside to come from i) conversion of OUE Bayfront chiller space into office space, ii) Deloitte’s below-market rent reverting to at least S$9 / psf if contract is renewed, iii) redeployment of capital from the potential divestment of One Raffles Place to acquire an additional stake in Salesforce Tower Sydney. There is limited first-order impact from the ongoing Iran conflict, as majority of utility costs are on fixed contracts.

 

 

 

 

 

 

The positives
+ Stronger hospitality performance. The hospitality segment registered a 15.1%/16.8% YoY
increase in revenue and NPI to S$26.8mn and S$24.3mn respectively. Hilton Orchard RevPAR
increased 11.2% to S$277 due to improved performance in the business traveller segment.
Crowne Plaza RevPAR increased 11.7% YoY to S$276, driven by resilient transient traveller
demand and by hosting crew members from the Disney Cruise voyage (c. 2,500 total crew
members). The US, Australia and China origin tourists led the recovery, while Indonesia faced
weakness due to weakening Rupiah. We expect full-year RevPAR growth to be in the high
single digits.
+ Office segment rental reversion momentum intact. Singapore office portfolio maintained
95.2% committed occupancy with 6.0% rental reversion in 1Q26, underpinned by the flight
to-quality trend. With 26.8% of office GRI expiring in 2026, at an average passing rent of
S$9.77 psf against a market rent of S$12.40 psf, we expect mid to high single digit reversion
to persist. Deloitte’s 150k sqft lease at OUE downtown expiring end-2026, which we estimate
to be contributing c. 5% of portfolio revenue (currently at sub S$8/psf rent), will be a key re
leasing opportunity. Moreover, OUE Bayfront has received planning approval for the
conversion of level 17 into 22,600 sqft of prime office space (estimated c. 6% NLA increase).
Market rents at OUE Bayfront is trending at S$16/psf, representing an estimated S$4.3mn
increase in gross revenue yearly.

+ Interest costs declined sharply. Financing costs fell 17.7% to S$17.2mn, with the cost of
debt falling 50 bps YoY to 3.7%. This was mainly due to repaying a S$100mn highest-cost loan
in the portfolio and replacing it with a lower-cost facility with a maturity of 2029. Looking
ahead, further relief is expected from the S$150mn medium term note due in 2026 set to be
refinanced with a facility of at least c. 5 years maturity. With 3M SORA at 1.04% (down 140
bps YoY), we continue to expect a meaningful reduction in financing costs.

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