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OUE Commercial REIT’s Unit Price Is Down 21% In The Last 12 Months. Is It Time To Buy?

OUE Commercial REIT (SGX: TS0U) is a commercial real estate investment trust (REIT) which owns OUE Bayfront, One Raffles Place and OUE Downtown Office in Singapore, as well as Lippo Plaza in Shanghai, China.

At the current price of S$0.50 (at the time of writing), OUE Commercial REIT’s units are down 21% from its 52-week high price of S$0.63. This raises a question: Is OUE Commercial REIT cheap now? This question is important because if the REIT’s units are cheap, it might be a good buying opportunity for investors.

Unfortunately, there is no easy answer. However, we can still get some insight by comparing OUE Commercial’s current valuations with the market’s valuation. The two valuation metrics I will focus on are the price-to-book (PB) ratio and distribution yield.

I will be using the average PB ratio and distribution yield for the 39 REITs that are listed in Singapore’s stock market. With that, let’s look at the comparison below:

Source: Yahoo Finance, OCBC Weekly S-REITs Tracker

From the above, we can see that OUE Commercial REIT’s distribution yield is higher than that of the market average, indicating that it’s trading at a low valuation. Similarly, its low PB ratio suggests that OUE Commercial is trading at a discounted valuation.

In sum, we can argue that OUE Commercial REIT’s current valuation is cheap as compared to the market average. Nevertheless, investors should also take a deeper look into the business fundamentals of OUE Commercial REIT before buying its units.

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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.