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Maybank Kim Eng Research 2015-07-30: Starhill Global REIT - Growth intact. Maintain BUY.

Growth intact 


 Results in-line; growth was mainly driven by contribution from latest acquisition. DPU growth still expected.
 Expectations tempered by weak visitor arrivals, FX volatility.
Maintain BUY with TP of SGD0.96 from SGD0.97.


What’s New 


  • 2Q’s results were in-line, revenue was SGD51.8m (+8.2% QoQ, +6.9% YoY), NPI was SGD41.3m (+6.3% QoQ, +5.5% YoY), DPU was 1.29cts (+2.4% QoQ, +3.3% YoY). 
  • The half-year forms 48%, 48.4%, and 49.3% of our full-year forecasts. 
  • Growth was mainly driven by 1.5mths contribution by latest acquisition, Myer Centre Adelaide. 
  • As Myer will contribute fully in the second half of the year, we expect our forecasts to be met. 
  • Aussie contributions soared: NPI was SGD6m (+53.2% YoY) due to Myer, partially offset by a weak AUD. 
  • Singapore assets Wisma and Ngee Ann contributed decently with NPI at SGD26.7m (+4.3% YoY). 
  • Considering poor visitor arrivals and a softening office market, occupancy was stable at 99.3% (1Q: 99.4%), and tenant sales stabilised (+3.5% QoQ, -6.7% YoY). 
  • Retail rental reversions were however, markedly lower at 3.9% (1Q: 13.3%), while office reversions were 4.5% (1Q: 6%). 
  • Malaysian properties’ NPI dipped 4.4% YoY to SGD6.7m, due to MYR depreciation. 
  • China remains competitive with NPI at SGD887k, but stabilising (+7% QoQ, -41.5% YoY). 
  • Japan’s NPI was stable at SGD883k (+7.7% QoQ) but down 11.3% YoY due to a weak JPY. 


What’s Our View 

  • We continue to expect DPU growth to be powered by Myer, Ngee Ann’s rent review (Jun16), and Malaysian assets’ rent step-ups (Jun16). 
  • However, we temper our rent reversion expectations for Wisma from 12% to 6% and further adjust for AUD/MYR/JPY currency depreciation which reduces our FY15-17 DPU expectations marginally from 5.2-5.8cts to 5.1-5.7cts. 
  • Maintain BUY with TP SGD0.96 (DDM, CoE 8.5%, LTG 2%), with 6.0-6.7% forward yields comparing favourably to retail sector’s 5.5%.


(Joshua Tan)


Source: http://www.maybank-ke.com.sg/



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