Report Summary

• Stock: OUE REIT (OUEREIT SP)
• Action: BUY
• Target Price: SGD 0.45 (+28% upside)
• Current Price: SGD 0.37
• Key Highlights:
  • 1Q26 revenue and net property income (NPI) up 6.7% and 8.4% YoY, driven by strong commercial and hospitality performance.
  • Hospitality revenue surged 15.1%, boosted by improved MICE demand and Disney Cruise operations.
  • Acquisition of a 19.9% stake in Salesforce Tower, Sydney, modestly DPU-accretive (0.9%), with a passing yield of 5.8%.
  • Potential divestment of One Raffles Place (valued at SGD 1.93bn) to recycle capital and reduce gearing.
  • Management constructive on office and hospitality fundamentals, expecting mid-single-digit office rental reversion and high-single-digit RevPAR growth for FY26E.
  • Cost of debt reduced to 3.7% (-20bps QoQ), with further reductions expected.
  • OUE REIT trades at a significant discount to book value and offers a dividend yield above 6%.
• Implications:
  • Actionable BUY call with a 28% upside to the target price.
  • Strong operational metrics and strategic asset management support the positive outlook.
  • Acquisitions and divestments are positioned to improve portfolio diversification and financial strength.