Broker's Take: OUE Hospitality Trust downgraded to 'hold'

KGI Fraser on Friday downgraded OUE Hospitality Trust to "hold" in view of a challenging environment and cut its target price to S$0.99 from S$1.04, implying an 8.9 per cent upside (including dividends).

"Nevertheless, we may buy again on the dips as OUE Hospitality Trust offers a high 7.0 per cent FY2015 forecast yield and further acquisition of the Crowne Plaza Changi Airport extension at end FY2015 may boost yield, with sporting events and SG50 possibly catalysing the comeback of visitors in the second half," the research house said.

It said OUE Hospitality Trust's distribution per unit fell 4.2 per cent year on year to 1.61 Singapore cents in Q1 2015, catching it by negative surprise as it had expected the acquisition of Crowne Plaza Changi Airport to keep performance stable.

Revenue per available room (RevPAR) from Mandarin Orchard fell to S$223 in Q1 2015 as compared to S$239 in Q1 2014 due to the absence of airshow this year and weaker tourist arrivals, especially from Indonesia.

While OUE Hospitality Trust may fare better compared to peers, there may be little room to take shelter amid the storm in the Singapore hospitality sector, said KGI.