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3 Things OUE Hospitality Trust’s Management Wants You To Know About Its Business

In late January, OUE Hospitality Trust (SGX: SK7) released its 2017 fourth quarter and full year earnings update.

As a quick introduction, OUE Hospitality Trust is a stapled trust that consists of a real estate investment trust and a business trust. The trust invests primarily in hospitality-related properties. Its portfolio currently consists of the Crowne Plaza Changi Airport hotel, and the connected Mandarin Orchard Singapore hotel and Mandarin Gallery high-end retail mall. All three properties are located in Singapore.

The Manager of OUE Hospitality Trust had given a presentation on the trust’s latest results. In the presentation deck, I saw three slides on the trust’s business that I think investors should pay attention to.

The first slide shows a high-level summary of OUE Hospitality Trrust’s income statement for the fourth quarter of 2017:


Source: OUE Hospitality Trust 2017 fourth quarter earnings presentation

We can see that the trust had a mixed quarter. Although there was growth in gross revenue, the trust’s net property income, distributable income, and distribution per stapled security (DPS) all fell. The weaker performance was mainly due to negative rental reversions in the Retail segment of the trust’s portfolio that took place in preceding quarters, as well as higher property expenses in the same segment.

The next slide I want to look at shows the breakdown of the trust’s portfolio by its properties:


Source: OUE Hospitality Trust 2017 fourth quarter earnings presentation

There are two important observations I have. Firstly, OUE Hospitality Trust has a fairly concentrated property portfolio with its largest property – Mandarin Orchard Singapore – accounting for 60% of its net property income in 2017. Secondly, hospitality properties (represented by Mandarin Orchard Singapore and Crowne Plaza Changi Airport) accounted for 79% of the trust’s 2017 net property income.

Putting both observations together, we can conclude that OUE Hospitality Trust has a fairly concentrated property and industry profile.

The last slide I want to discuss shows a geographical breakdown of the customers of the trust’s hospitality properties:


Source: OUE Hospitality Trust 2017 fourth quarter earnings presentation

We can see that the trust’s hospitality customers come from a wide variety of geographies, but there’s still a concentration toward people from Asia.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.