CGSI raises target price on OUE Reit to S$0.41 on better-than-expected 2025 earnings, positive outlook

[SINGAPORE] CGS international raised its target price for OUE Real Estate Investment Trust (Reit) to S$0.41 from S$0.38 on the back of better-than-expected 2025 earnings and positive outlook for 2026.

Analysts Lock Mun Yee and Li Jialin kept their “add” call on the counter, given the management’s positive view on rental revisions for commercial assets, and the better outlook for the hospitality segment, driven by a stronger event calendar.

They also expect interest expense savings and benefits from the potential acquisition of a Sydney CBD Office, they said in a note on Wednesday (Jan 28).

Earlier that week, the manager of OUE Reit posted a distribution per unit (DPU) of S$0.0125 for the second half ended December, up 10.6 per cent year on year from S$0.0113.

For the full year, DPU rose 8.3 per cent to S$0.0223, from S$0.0206 a year earlier. The amount available for distribution grew 13.9 per cent on year to S$123.8 million.

This was above CGSI’s full-year estimate, driven by a rebound in the hospitality segment, finance expense savings and one-offs, the analysts noted.

The analysts expect further financial cost savings in 2026, with weighted average cost of debt likely to fall by another 40 basis points, according to the management’s guidance.

They also expect further interest expense savings, from the refinancing of interest rate swaps and their S$150 medium-term note in 2026.

Meanwhile, Lock and Li also noted that OUE Reit was reported to be in exclusive talks with Mitsubishi Estate Asia for a potential acquisition of a partial stake in Salesforce Tower, Sydney.

They believe this transaction could be a ‘low-hanging opportunity’ for OUE Reit to execute its growth strategy.

Funding this S$317 million acquisition fully with debt could lift gearing to approximately 40.7 per cent, they noted.

Units of OUE Reit closed 1.3 per cent or S$0.005 higher at S$0.38 on Thursday.