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Thursday, 18 July 2013

OUE Hospitality Trust

OUE Hospitality Trust ("OUE HT" or the "Trust") finalized its offer at the 'bottom' range of the book-building range of $0.88.

OUE HT is offering 434.598m Units of which 383.462m will be via placement and 51.136m Units via public offer. The Sponsor will receive 626.782m Units and the Cornerstone will subscribe for 247.22m Units. The market cap for OUE HT will be $1.738 billion. There will be an over-allotment of 68.182m units. The final registered prospectus is here.

My preview post is here. Again, i will not repeat what i have previously discussed in the preview post but dive straight into the key points.

Key timetable
18 July 2013:   Public offer starts
23 July 2013:   Public offer ends at 12pm.
25 July 2013:   Starts trading at 2pm.

Forecasted yield

One way in which you can view this is that you are 'guaranteed' a minimum yield of 4.5% due to the master lease agreement and long term lease at the retail mall.  The upside will come from the hotel hospitality business.

What i like about OUE HT
  • Opportunity to invest in Mandarin Orchard and Mandarin Gallery on Orchard Road.
  • Stable distribution with downside protection due to long term master lease agreement
  • Right of first refusal on the Sponsor's pipeline
  • An experienced CEO with track record.
My concerns
  • Relatively shorter lease life of the properties

OUE HT has a projected yield of 7.36% and price to book of 0.97x and leverage of 33.8%. 

Ascendas HT is trading at 8.6% yield and price to book of 1.04x. Leverage 35%
CDL HT is trading at 6.4% yield and price to book of 1.07x. Leverage 28%
Far East HT is trading at 5.9% yield and price to book of 0.97x. Leverage 29%

Mr IPO's comments and ratings

Given the peers' valuation and that they are not exactly comparable, i think OUE HT is priced fairly. My gut feel is that it will probably trade between yields of 6.8%-7.5%. In this regard, it will represent a trading range of between 86 cents and 95 cents with slight upside bias from its listing price.

Frankly i am not sure why they have to close the IPO one day after SPH REIT. Investors will be forced to choose and split their cash application and this may not work in OUE H-Trust's favor given that SPH REIT has been priced at the top of its range due to overwhelming demand.

I am going to give OUE HT a one chilli rating as well but if you asked me to compare between SPH Reit and OUE HT, i think SPH REIT is probably going to perform slightly better than OUE HT post-listing.  

I will not have placement shares on OUE HT and will spend the next few days thinking about whether i will apply for this.

Happy decision making! ^_^ but don't ask me to make that decision for you please...


CE said...

Hi, you mentioned that Ascendas Hospitality Reit is giving a yield of 8.6%. May I know how you get the figure? The Bloomberg website gave the figure "Dividend Indicated Gross Yield: 2.42%" I'm new to reits hence any advice is highly appreciated.

Mr. IPO said...

Cannot be so low la. You check ascendas prospectus lor. My peer valuation included a link to the blog which I got the data and the basis is written there.

Anonymous said...

I just think this indonesian stephen riady is a very proud person. He picked 1 day after sph to list his reit because he want to outperform it. Expect $1.15 for this stock. Indonesians are ai mian zi.

Master Degree Hotel Management said...

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