SINGAPORE (Oct 4): OCBC is maintaining its “hold” rating on OUE Commercial REIT (OUECT) with a lower fair value estimate of 67 cents.
OUECT announced that it will be carrying out a redemption of 75 million convertible perpetual preferred units (CPPUs) at an issue price of $1 per CPPU.
The issuance of these CPPUs to OUECT’s sponsor was for partial payment of the purchase consideration for the trust’s stake in One Raffles Place.
This means OUECT's finance costs will creep up as the redemption will be largely funded by its existing loan facilities.
“On balance, we expect DPUs to soften slightly by 0.2% and 0.8% in FY17 and FY18 against our last forecast, respectively,” says analyst Joseph Ng in a Monday report.
Following the redemption on Nov 2, the trust will have 475 million CPPUs left outstanding.
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“We also believe it is possible for more CPPUs to be redeemed ahead of the non-call period in 2019, though a full redemption of the outstanding 475m units is highly unlikely,” Ng adds.
On the other hand, the analyst believes that the office sector is improving as demonstrated by the flat q-o-q Grade A CBD Core monthly rents of $8.95 in Q217, according to CBRE.
As at 10.23am, units in OUTCT are trading at 72 cents.
