Stock Idea Amidst rising interest rates, here’s our view on | FSMOne SG - Research Highlights

Stock Idea

Amidst rising interest rates, here’s our view on OUE Commercial REIT

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• Despite another challenging year, OUECT announced a distribution of SGD 142.0 million for FY21, which translates into a year-on-year increase of 7.0% in DPU of SGD 2.60 cents.

• Looking ahead, we expect the REIT’s near-term performance to stabilise on the back of positive office leasing momentum and improved consumer sentiment.

• Meanwhile, the relaunched Hilton Singapore Orchard is anticipated to capture corporate clients through Hilton’s strong brand recognition and global network.

• However, with an above-average gearing ratio of 38.7%, we think OUECT likely faces greater pressure from a higher-than-expected rise in interest rates as compared to the broader sector.

• We maintain our target price of SGD 0.40. While we are neutral on OUECT, income-seeking investors can look forward to an average yield of around 6.3% over the next two years based on our estimates.

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: OUE Commercial REIT (SGX:TS0U)